For federal income tax withholding on bonuses in the scenario, which method is used?

• A. Flat rate Method
• B. Percentage Method
• C. Wage Bracket Method
• D. Aggregate Method

Answer: (A)

Bonuses are treated as supplemental wages for federal income tax withholding. When paid separately, the flat rate method is used, applying a fixed percentage (currently 22%) to the bonus amount. This keeps withholding straightforward and independent of the employee's regular wages or tax bracket for that pay period. You would only use the aggregate method if you combined the bonus with regular wages in that same payroll run, calculating withholding as if it were one larger paycheck using the regular tables. The wage bracket method is another way to calculate withholding for regular wages (part of the aggregate approach) and isn't the default for a separate bonus. Therefore, the correct approach for withholding on the bonus in this scenario is the flat rate method.