Sometimes, a person will receive a special payment from his employer, usually a one-time lump-sum payment that is not directly tied to his employment contract. This money is known as a bonus. Bonuses are commonly provided at holidays or as a compensation for special performance. In Arkansas, as in other states, the recipient of a bonus must pay taxes on it similar to the taxes he pays for his other income.
A bonus differs from normal wages only in that an employer is not guaranteed or required to provide it to his employee. Rather, he has discretion as to when to award the bonus. However, in some cases, an employee may be guaranteed a bonus for meeting certain performance goals. In such a case, the payment is not really a bonus, but a different form of normal, pre-scheduled compensation.
Arkansas has six different tax brackets under which it taxes employees. These ranges from 1 percent of an individual's income to 7 percent of the person's income, depending on how much money he makes. When a person is awarded a bonus, he will likely have to withhold a pre-set amount of state taxes according to the tax bracket in which he belongs, some of which he may be refunded later after he files his taxes.
In addition to state taxes, the individual receiving a bonus will also have to pay federal taxes. These, like state taxes, fall into six different brackets. In addition, depending on where he lives in in Arizona, the person may also have to pay city or county taxes, which may or may not have to be withheld, depending on the municipal government's policies.
It is a common misconception that bonuses are taxed differently than other forms of income, as they are not part of a person's regular annual salary. While they are indeed classified differently by the IRS, they are generally subject to the same tax rate as other, regular wages. However, if the bonus is a non-cash bonus, such as shares of stock, then it may be taxed differently than normal wages.
Michael Wolfe has been writing and editing since 2005, with a background including both business and creative writing. He has worked as a reporter for a community newspaper in New York City and a federal policy newsletter in Washington, D.C. Wolfe holds a B.A. in art history and is a resident of Brooklyn, N.Y.