Burned By the Bonus!

Dear Dave,

My husband always gets a bonus at work around the first of the year. The problem is that his company never takes enough out in taxes, and we get clobbered at tax time. He makes $150,000 a year, and this time his bonus was $105,000. They withheld 18 percent, but that’s not enough. What should we do?

Karen

Dear Karen,

If you guys make $150,000 a year, that puts you in the 33 percent tax bracket – with or without the bonus. That means 33 to 38 percent of his bonus money will end up in Washington. 

If I woke up in your shoes, I wouldn’t leave it up to the government or the company to get it right. I’d put about 22 percent of the bonus amount into a money market account just to be safe. I’d just let it sit there and be ready when tax time rolls around. That way you’ll be fine if you owe money, and you’ll have some extra savings if you don’t!

- Dave

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