Typically, when you pay employees, you withhold taxes from their paycheques. This allows you to keep track of payroll easily, because everyone makes a set amount every pay period throughout the year. This process of tracking a worker’s pay, referred to as the periodic method, is often effective with regards to withholding income taxes.
However, the periodic method may actually create a situation where you withhold more income tax than necessary if your employee has an unusually large paycheque. Having a larger-than-normal cheque can result when you add a bonus or other lump-sum payment onto your employee’s weekly salary. To avoid withholding more taxes on an employee’s paycheque, consider using the bonus method rather than the periodic method to pay an employee.