Bonus Definition

Term Definition
Bonus pay is defined as the compensation awarded by employers over the base salary and is generally distributed at the employer’s discretion.

Extended Definition
All bonuses are treated as supplemental income by the IRS. However, the income tax levied on the bonus is dependent on the bonus value and the current income tax bracket of the employee. Most significant bonuses are awarded at executive levels and higher to mark important achievements within the organization. For bonuses valued at over $1 million, the IRS levies a tax of 35%. This tax is withheld by the employer and paid directly to the IRS.

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