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I am getting a signing bonus (5K) on the new job. When the employer gives the signing bonus will I receive the whole 5K or will I received after the tax (35%)?

Any experiences?

I am in United States.

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    What did they say when you asked them? – GrandmasterB Jul 28 '14 at 18:35
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    And why do you think we would know the signing bonus policies of some unnamed company located in an unknown state/province of and unknown country? If they said 'gross 5k', then expect taxes to be taken out. – GrandmasterB Jul 28 '14 at 18:39
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    @GrandmasterB Thanks for the answer but you don't have to be so rude! – john doe Jul 28 '14 at 18:40
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    Most of the time the taxes are taken out. IRS prefers it that way. – HLGEM Jul 28 '14 at 18:43
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    It's never too late to ask an employer about stuff like this, especially if you have accepted the offer. Just call and ask the HR person. They will appreciate the open line of communication; signing bonuses are a bit of a hassle for them and they'll be happy to set your expectations ahead of time. – O. Jones Jul 28 '14 at 22:15
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I am getting a signing bonus (5K) on the new job. When the employer gives the signing bonus will I receive the whole 5K or will I received after the tax (35%)?

There are too many factors here for a company to do give you after tax only bonus. Using the United States as an example:

  • Your taxes are different depending on how many dependents you have (children, spouse, etc)
  • Many companies have multiple medical plans which also vary based on children
  • Your taxes can vary based on voluntary deductions (401k, 403b, HSA, pensions, etc)
  • You may not work an entire year

They are complicated to perfectly predict but you likely will have taxes of about:

  • 25% federal tax
  • 6-8% state tax (varies by state, some cities have tax too)
  • 7.65% FICA tax

So a $5,000 signing bonus would be more like $3,000 take home pay. Specifically from Turbotax:

The IRS specifies a flat “supplemental rate” of 25%, meaning that any supplemental wages (including bonuses) should be taxed in that amount. If you receive a $5,000 bonus, under this rule, $1,250 (25% of $5,000) goes straight to the IRS.

Note this is only federal tax.

You will likely have to treat the bonus as income when you file your taxes for the year you receive the bonus. This may result in a different actual tax rate than the withheld rate. This gets complicated for the above reasons and may be different for everyone.

  • This will be interesting because at the time when the signing bonus will be handed to me the company will not have any information regarding my dependents. This is because my benefits start 90 days after the start date of the job. – john doe Jul 28 '14 at 18:56
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    Am I right in thinking this is your first job? When you fill out your W-2 you tell them how much to withhold. – Amy Blankenship Jul 28 '14 at 19:27
  • No! This is not my first job. This is a senior level position. Also this is a SIGNING bonus which is given when you JOIN the company. – john doe Jul 28 '14 at 19:39
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    Many companies will still require you to fill out a W-2 before they will pay you anything (even your signing bonus). If not, they will assume the highest-tax bracket possible with the income they will be paying you (i.e., no dependents or deductions). Whatever they deduct initially is only an estimate in any case, and it will all be worked out in gory detail when you file your tax returns next April. – PurpleVermont Jul 28 '14 at 20:07
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When the employer gives the signing bonus will I receive the whole 5K or will I received after the tax (35%)?

Signing bonuses are generally ordinary income, and thus subject all local taxes.

The taxes may or may not be withheld from the check you receive. Usually, this depends on exactly when you receive the bonus.

If they are withheld, you'll receive the net amount. If not, you'll receive the entire 5K, but will still be required to pay the taxes due with your year-end tax return.

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This depends on the company, the country and it may also depend on the industry. In the software industry in the US, in my experience, most companies give you the after tax amount(applying the remaining, appropriately enough, to the taxes on the money). I have heard of one or two companies that leave taxes up to the recipient but, again in my experience, that is not the norm.

It makes sense for most companies to handle the taxes and give you the post-tax amount.

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    US based companies have a standard % they would withhold based on the salary. Any over or under withholding would be taken care of in tax returns. – GrandmasterB Jul 28 '14 at 18:47

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