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You can pay bonuses during a regular pay period by entering the bonus amounts directly into the hourly or salaried employees payroll. However, if you need to adjust the amount of tax collected or want to process it as a standalone payment, you should run it as an off-cycle payroll.
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If you’d like to surprise your employees with a year-end bonus, you may want to run a special bonus payroll after you run your regular payroll. By doing this, your normal payroll processing cycle will not be impacted (i.e., period ending dates and check date).
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And the IRS requires a flat 25% withholding on bonus pay, which few employers probably comply with, instead allowing recalculate on of tax as if the pay with bonus were to be the annualized rate- meaning possibly more tax is withheld than required by law in some cases, and less in others.
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If you’d like to surprise your employees with a year-end bonus, you may want to run a special bonus payroll after you run your regular payroll. By doing this, your normal payroll processing cycle will not be impacted (i.e., period ending dates and check date). To create and process a Special Payroll: On the Home menu, select Special Payroll.
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Many employers start thinking about gifts or bonuses for employees during the holidays, at the employees work anniversary, or at an achievement recognition ceremony. But before you give out those awards or bonuses or gifts, consider the tax implications for your business and for the employees.