Bonus Tax Calculation

How do you set up an income in Sage so that it uses the bonus method to calculate the taxes for a bonus paid to employees?

Taxes need to be calculated differently than for regular income and I don't see a way to set this up.  I've called Sage twice and had issues with the calls both times.

  • 0

    Yes, same thing here. Looking for an answer?

  • 0

    Sage does not have this ability.  You will need to calculate taxes manually for the bonus.

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    Hey

    Thanks for reaching out. Here's KB 25388 on How to create a bonus income in payroll so that the net value is a specific dollar amount (reverse calculation). Also see this KB on how to pay a bonus with the correct income tax withheld.

    Warm Regards, 
    Erzsi

  • 0 in reply to Erzsi_I

    There's a type of payroll calculation in Canada that's call Bonus Tax Method. The two links that you send is not the answer that we were looking for. We're not looking to do a Gross to Net Bonus calculation nor are we looking how to set up Bonus pay code. As per user C White, it seems Sage does not have this ability. 

    An employee has complained too much taxes were taken from her bonus payment, that was paid along with her regular salary. Sage simply take the pay as a lumpsum for the period and taxed accordingly. However, if we use CRA's website PDOC to calculate, the taxes were calculated separately and it's significantly less than what Sage calculated. 

  • 0 in reply to Erzsi_I

    You can't use the lump sum tax rates for calculating the taxes on a bonus during employment.  There are only a few times where the lump sum tax rate can be used.  The 10 and 20% rates indicated on your second link is using the lump sum percentages.  If I was paying a death benefit I could use the lump sum, or for a retiring allowance I could as well.

    The manual method for calculating the taxes on a bonus is done one of three ways depending on the scenario
    First bonus paid to an employee:
    1, determine the pay period earnings before the bonus
    2. Divide the bonus by the number of pay periods
    3.  Add the answer from step 2 to step 1
    4. Calculate the federal taxes on the salary from step 1
    5 Calculate the federal taxes on the salary from step 3
    6.  Find the difference between step 4 & 5
    7. Multiply the difference in step 6 by the number of pay periods in the year
    Repeat for provincial taxes

    The amount is a retroactive pay increase:
    1. Determine the pay period earnings before the increase
    2. Determine the pay period earnings after the increase
    3.  Calculate the federal tax on Step 1
    4. Calculate the federal tax on Step 2
    5, Find the difference between 3 & 4
    6. Multiply the difference in the taxes by the number of pay periods the retroactive increase applies to.
    Repeat for provincial taxes

    The bonus is not the first amount received in the year.
    Similar to the first method, but you must add the amount of the previous bonuses received into the annual earnings for the employee and then find the difference between that and the amount now being earned with an additional bonus.


  • 0 in reply to QSI

    Nor is their method for calculating the taxes correct.