Definition
Pay outside the regular paycheck: bonuses, commissions, severance, overtime, and similar. Employers commonly withhold federal tax on these at a flat percentage set by the IRS rather than your W-4 rate, which is why a bonus check looks unexpectedly small.
Why it matters
The heavy withholding is not an extra tax, just a different withholding method: your real tax is settled by your bracket at filing. Knowing that prevents both the bonus-day disappointment and bad decisions like refusing overtime.
Example
A $5,000 bonus arrives as roughly $3,300 after flat federal withholding plus payroll and state taxes. At filing, the bonus is taxed at the worker's actual marginal rate; if the flat withholding overshot it, the difference comes back in the refund.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.