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Pay an employee bonus

SOLVED•by QuickBooks•4079•Updated 1 week ago

Learn how to pay an employee bonus using QuickBooks Payroll.

Bonuses are fun to pay out for a job well done. Compliment your employees by giving them bonuses. We’ll show you how to pay bonuses in your payroll product.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Step 1: Determine how you want to pay out the bonus

You can pay your employees with bonuses along with their regular pay or through a separate paycheck.

Pay bonus along with the regular pay

  • If you pay bonuses along with the employee’s regular pay, the bonus amount is taxed the same way as the employee’s salary.
  • Any deductions set as percentages will come out of the bonus.  

Pay a separate bonus check

If you pay bonuses separate from the employee’s salary:

  • You can apply the federal supplemental tax rate of 22%, or 37% for bonuses of $1,000,000 or more.
  • You have the option to pay the bonus as a gross pay or as a net pay. For the net pay example, if you want your employee to take home $1,000, the payroll product will gross this up and you’ll pay the employee part of taxes.  
  • If you use QuickBooks Online Payroll, your employees won't receive an email notification about their bonus from QuickBooks Workforce.
  • Online Payroll Only: Your employees can only have the bonus go to one direct deposit account. If you have an employee you pay with direct deposit to two accounts, bonus-only paychecks will be deposited 100% into the secondary account.

Step 2: Add the Bonus pay type

Follow the steps below for your payroll product.

If you choose to pay a bonus along with the employee’s regular pay, add the Bonus pay type before you run payroll. If you choose to give the bonus through a separate check, skip to Step 3: Payout the bonus.

  1. Go to Payroll, then Employees (Take me there).
  2. Select your employee.
  3. From Pay types, select Start or Edit.
  4. In the Common pay types section, select Bonus.
  5. Select Save.
  1. Go to Lists, then select Payroll Item List.
  2. Select Payroll Item then New.
  3. Select Custom Setup, then Next.
  4. Select Wage, then Next.
  5. Select Bonus, then Next.
  6. Enter the name of this item, then select Next.
  7. Select the expense account you want the item to track to, then select Finish.

Step 3: Pay out the bonus

When supplemental wages, such as bonuses, are paid with regular wages on a single paycheck, federal income tax may calculate at a higher tax rate. Direct your customer to review Section 7 of Publication 15 for more information. We recommend that customers create bonuses separate from regular paychecks for appropriate federal tax withholding.

Pay bonus along with the employee's salary

  1. Go to Payroll, then Employees (Take me there).
  2. Select Run payroll.
  3. Select your employee, then enter the amount in the Bonus field.
  4. Select Preview payroll, then Submit payroll.
  1. Create your payroll as normal.
  2. Open the Preview Paycheck window.
  3. In Earnings, enter the Bonus item you created in Step 2.
  4. In the Rate column, enter the gross amount of the bonus.
  5. Adjust federal and/or state withholding taxes as needed.
  6. Select Save and Close or Save and Next to continue creating paychecks.

Note: Regular deductions (retirement, health insurance, child support) may apply to the bonus amount. Consult your tax/financial advisor or the plan advisor for information about these deferrals on bonus paychecks.

Pay a bonus-only paycheck

Notes:

  • If you enter the bonus amount “As net pay”, you don’t have the option to deduct retirement, HSA, or garnishments.
  • If an employee uses split direct deposit, bonus-only paychecks will deposit into the secondary account only.
  1. Go to Payroll, then Employees (Take me there).
  2. From the Run payroll ▼ dropdown, select Bonus only.
  3. Choose how you’d like to enter the bonus:
    1. As a net: The employee gets the exact bonus amount. Taxes are still calculated but it’ll be an company-paid tax.
    2. As a gross: We’ll figure out the net amount for you.
  4. Select the employee, then enter the Bonus amount.
  5. Below the list of employees, select Edit ✎ next to Payroll options.
  6. Select the payroll options you want. Then select Apply.
  7. Select preview and submit payroll.
  8. If you’ve selected As net pay, the pay stub includes Employee Taxes Paid by Employer in the pay section.

These steps are for gross pay bonus amount.  If you want to enter a net pay bonus, you’ll need to gross up your paycheck.

  1. Go to Employees, then select Pay Employees.
  2. Select Unscheduled Payroll.
  3. Verify the pay period end date, and the check date, then select the employee you want to pay.
  4. Select Open Paycheck Detail.
  5. Remove the Earnings and Other Payroll Items as needed.
    • Regular deductions (retirement, health insurance, child support) may apply to the bonus amount. Consult your tax/financial advisor or the plan advisor for information about these deferrals on bonus paychecks.
  6. In Earnings, enter the Bonus item you created in Step 2.
  7. In the Rate column, enter the gross amount of the bonus.
  8. Adjust federal and/or state withholding taxes as needed.
  9. Select Save and Close or Save and Next to continue creating additional bonus paychecks.

 

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