If you received a holiday bonus this year, congratulations! A 2014 survey by Challenger, Gray, and Christmas, found that 78 percent of the surveyed companies planned to give out a year-end bonus or gift last year. About half of those planned to give traditional monetary bonuses based on company, departmental, and/or employee performance.
Your first thoughts are probably about how you plan to spend your reward. The effect on your taxes probably does not even cross your mind. It should, because it can affect what you decide to do with any significant bonus and/or keep you from any nasty tax surprises.
Let's start by looking at how holiday bonuses are usually taxed, starting with a straightforward extra check.