Expert: Ed McFarland - 6/15/2006

Question
is it at the employers descretion to tax bonus pay at a higher tax rate than normal?  if an employees payroll check was "short" and not for the correct full amount (30 hr paycheck instead of 40 hrs), and then a correction check is issued for the difference (10 hrs), can this correction check be taxed at higher than normal tax rates (like a bonus)?  are there any other instances where pay would be subject to higher than normal payroll taxes?

Answer
Not the employer, but the tax charts. Taxes are graduated and paid on the last dollar earned.

Your normal paycheck could be in one bracket (15%), extra would put you into the next tax bracket(28%).

Often times, overtime is counter productive. That you move into a higher rate and makes the extra seems lost to the tax man.