What the W-4 controls
- Filing status (Step 1) and the standard-deduction input (Step 2 option) — the core of regular-check withholding.
- Dependents (Step 3): $2,000 of child credit per kid reduces withholding.
- Other income (Step 4a) and deductions (4b): pulls side income into withholding.
- Extra withholding (4c): a flat dollar amount per check — the cleanest compensation lever.
What it doesn't control
Supplemental wages paid separately (most bonuses and OT) are withheld at the flat 22% no matter what the W-4 says. Aggregate-method bonuses — paid merged with regular wages — do use the W-4, which is one reason some employers avoid them.
A sensible playbook
- Let the bonus withhold at 22%; note the overshoot if your bracket is lower.
- If cash flow matters, bump Step 4(c) down to zero or reduce dependents for the rest of the year so the refund isn't your only path back.
- Alternatively, direct the bonus itself into 401(k)/HSA elections before payroll runs — shrinking the taxable base beats fighting the rate.
- Redo the W-4 after big life events; the 2025 overhaul makes the form far more accurate than the old allowances version.
Frequently Asked Questions
Should I claim exempt to keep my whole bonus?
Claiming exemption from withholding is only lawful if you had no tax liability last year and expect none this year — otherwise it just moves the bill (plus possible penalties) to April. The bonus is taxable income either way.