Gunfighter

He knew (knows) the tax code.

Withholding on supplemental payments is 22%. The actual tax liability is the same as any other earned income, which will be calculated when you file. A financially astute aviator will either make their own adjustments throughout the year or get guidance from their CPA regarding expected annual tax liability.

PeteyT

Pretty snarky for someone that's wrong.

m3113n1a1

No they're not. Withholding rate does not equal tax rate. Also bonuses aren't even withheld at the top marginal tax rate.

CX500T

Well then someone better get Baker Hughes, The DoD and a bunch of other companies I have worked for to stop taxing it at top marginal. I know both Baker Hughes (big oil company) and the Navy both hit my check for what was pushing 40% with SS, Medicare, Fed and State, because their archaic payroll systems basically took "current check x 24" and used that to determine what tax bracket you were in. And most bonus checks, if they were your normal check, would firmly land your behind in that bracket.

In the case of my retro check, I had 39% taken out as taxes. That is all categories of federal, and VA.

Here is the cropped section of my retro pay stub. See it yourself.

Virginia, Married, 2 on my taxes.

EDIT-
I realize I posted top marginal. Had a brain fart, it ends up being basically at top marginal when you take the 22% with SS, Medicare taken out, it's close to 35% from the feds. 39% overall in my case.

higney85

We are mixing federal tax rate into an end result rate. Those deductions posed? That’s 22% PLUS ALPA, SS, Medicare, and state (as applicable).

*edit- also 401K allocation in the “non-retro” pilot payment.

tennisguru

Again, there is a difference between what a company must WITHHOLD from your check, vs what you actually OWE in taxes at the end of the year. In an extreme example, if your tax liability for the tax year is $0, and you got a $10,000 bonus check, the company must withhold $2,200 federal income tax. When you file your taxes for that year you would then get that $2200 back as a refund. Earned income is earned income regardless of the source or type of payment. All the IRS sees as the end of the year is your taxable income. From that you get your tax bill, and based on what you had withheld throughout the year you will either get a refund or owe money.

And as Higney said above, the 22% is JUST the Federal income tax withholding rate. All other applicable taxes and deductions come out on top of the 22%.

OOfff

withholding is different than actual tax liability

CX500T

Yes, but when the guy was pointing out he had a 35% bite out of his check and BR called BS on that.

Regardless of what will wash out in March-April 2024, most pilots had about 35% go POOF out of their check for retro, back pay, pick your own name for it. In my case I had about another 4% go poof because of Virginia.

OOfff

so adjust your w4 if you’re that short on cash

OOfff

Also, not that it matters much, but 20/57 is .35, so you had 35% taken out, not 39%.