Discretionary Bonus

QuickBooks has the Bonus hardcoded on the previous menu, which is why it doesn't appear in that specific dropdown. Your advisor is absolutely correct. Since this is a discretionary bonus, it’s wise to track it separately from your regular annual bonuses. This approach helps maintain accurate overtime calculations and gives you better control over tax withholdings.

To complete the setup, you can select Other Earnings as the Type. Here’s how to do it:

1. In the box labeled Name (as shown on paycheck), enter a custom name like "Discretionary Bonus".
2. In the Type field, select Other Earnings.
3. Click the green Save button at the bottom.

Before you run the payroll, we need to ensure this is processed exactly as your advisor intended. Did your advisor specify how they want the taxes withheld on this bonus?

Because you're setting this up as Other earnings on their regular profile, adding this amount to their normal paycheck will combine it with their regular wages for tax calculations. This can result in a higher tax withholding for that specific check. If your advisor prefers to use the IRS flat 22% supplemental tax rate for this bonus, you'll need to process it as a separate Bonus only payroll run.

I look forward to your reply. Please feel free to revisit this thread if you have any additional questions.

In QBO, discretionary bonuses are handled differently from regular bonuses. Here's the cleanest way to do it:

Go to Employees → select the employee → scroll down to "Additional pay types" → click "Add" → choose "Bonus" as the type (it should be available in the dropdown). If it's not showing up under the dropdown options, you may need to first enable bonus pay types in Payroll Settings.

If you still don't see "Bonus" as an option, try this instead: process a regular paycheck and add the bonus amount as a one-time addition under "Add to paycheck" — enter the amount and label it "Discretionary Bonus." QBO will handle the tax withholding at the supplemental rate automatically.

The distinction between discretionary and non-discretionary is mostly about how you communicate it to the employee (discretionary = not expected, at employer's discretion) rather than how QBO processes it. As long as you're using a Bonus pay type or adding it as supplemental pay, the tax treatment should be correct.