I saw online that you should tax commissions at 25%. Where would I put that on the Proseries return to tax it at 25%? Thank you.

Forum|Forum|4 years ago
April 19, 2022
5 replies
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jeffmcpa2010

Level 10

If you cut and paste what you saw here, so we can read it, that will help.

Then we will be able to explain why it is incorrect.

D

Debst99Author

Level 5

For example, if your bonus or commission is included in your regular pay, then it’s taxed according to normal federal and state withholding. If you receive it outside your regular paycheck, then it becomes supplemental and your commission is taxed at a rate of 25%.

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jeffmcpa2010

Level 10

That quote is specifically referring to how much income tax an employer withholds from a commission based employee, not the actual tax rate the employee pays when preparing their income tax return.

Prepare the return like any other return - If the commission is on a W-2 just enter it like any W-2 based income.

If on a 1099-NEC - (Most of the time) they are treated as a proprietorship and the Commission and any expenses are reported on Schedule C.

qbteachmt

Level 15

Also, it matters who is paying commissions to whom for what reason, and which of these is the tax return you are preparing. Perspective is important. Details matter.

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dd4vols

Intuit Community Champion

Perhaps you are misinterpreting what you read. I often have first-time self-employed individuals ask for advise on how to handle their quarterly estimates...i.e. how much to put back for taxes out of income. Depending on individual scenarios, but I often tell them to PUT BACK about 25% (SE Tax 15% + INC TAX 10%), of each check (income), and then send that in quarterly.

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T

TaxGuyBill

Level 15

My mind reading skills indicate that you read a pre-2018 article, that said the EMPLOYER should WITHHOLD taxes at 25% (but starting in 2018, it was reduced to 22%)..

The actual tax return still taxes it at their 'normal' rate, whatever that may be.

qbteachmt

Level 15

If Bill is right: you are asking about Payroll. "Supplemental Wages" (see Pub 15) such as Bonus and Commission (non-routine additions to paychecks) fall under different withholding rules, and the employer would already have done this through the payroll process. Your taxpayer will have a W2. You enter the W2. It becomes part of the entire tax return.

If dd4vols is right: You are asking about being prepared to send in Estimated taxes. Since the business revenue contributes to the entire 1040, the concept of 25% is nice, but might not be applicable to your taxpayer. For estimates, that is based on the entire 1040 tax owed, as projected or as "safe harbor" lookback. Having children, spouse with income, investments, etc, all contribute to the final picture on the 1040. The business taxable amount mixes into the 1040.

Or, it might be a different concept, yet. Right now, everyone is mindreading.

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