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I got a bonus check and elected 100% into a pre Tax 401K. I knew FICA would come out but was surprised when federal tax came out as well. The Gross was $2278. with $85.07 going to federal and $174.26 going to FICA. The total 401K contribution was $1937.74 O'ya and Phili Tax was $80.93. I don't understand why federal tax came out when the 401K is exempt from federal tax? Any input is appreciated....

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I think that the answer lies in the fact that the portion of your check that was deducted for FICA does not lower your AGI.

Because FICA is deducted regardless of the 401(k) election, this causes the amount that actually goes into the 401(k) to be less than the gross amount. And that difference is considered taxable income, even though it has been deducted as tax itself (source).

So a federal deduction is made as some percentage of the FICA deduction, but this now increases the difference between the gross amount and the amount going into the 401(k). Thus the calculations must work out so that amount deducted for federal taxes is equal to some percentage of the total difference between the gross income and the tax-deductible portion of it.

Furthermore, I disagree with the other answers about your employer attempting to anticipate your income and split taxes evenly across all checks. Although this may be the goal for your recurring paychecks, bonuses are (or at least, can be) treated as supplemental income for the purpose of calculating taxes, and can be taxed at a flat rate of 25% (source).

Indeed, if you examine the numbers presented in your question, you will see that the Federal deduction of $85.07 is (after rounding) equal to 25% of the difference between your gross bonus amount and the amount that was eventually contributed to the account (2278 - 1937.74 = 340.26).

As unfair as it may seem, ultimately you are paying federal taxes on the amounts deducted for other taxes.

  • As an aside, the local taxes you paid clearly factor into this as well. I am from Texas, and therefore don't pay any state or local income taxes, so I'm not familiar enough with how this works to make blanket statements about the effect of local taxes in such a scenario. Since that's the case, I did not mention the local tax in my answer, in order to avoid misleading anyone from a different locale with potentially different rules. – Wesley Marshall Feb 17 '16 at 19:55
  • Perhaps one or both of you had your withholding miscalculated, but there should definitely be an impact on the amount of taxes owed, since this payment causes the OP's AGI to increase. – Wesley Marshall Feb 17 '16 at 23:16
  • Yes, I meant "withheld for FICA" rather than deducted. My mistake. I understand that the retirement contribution does not increase the AGI. My point is that a portion of the check was never going to go to the 401(k), despite the election of a 100% contribution. That portion does increase the AGI. – Wesley Marshall Feb 18 '16 at 1:23
  • I deleted out my prior comments. I'm with you now under these additional constraints: (1) Pretty much everywhere you've said "deduction" you should probably edit and say "withholding." (2) The fact that this is a bonus seems to be critically important. For #2, it's too long for a comment, so I'm going to write a supplementary answer. Feel free to pull some of that into your answer if you agree. – user32479 Feb 18 '16 at 1:41
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The answer by Wesley Marshall seems to be basically correct (although I earlier disagreed with him in the comments based on some of the wording). I'm writing to add only that the part about this being supplementary income is more important than the weight than I think he gave it in his original answer.

If this were a regular paycheck with an instruction to contribute "100%" to a traditional 401(k), then you would have $0 federal income tax withholding. The small amount by which your AGI goes up in this case (unless you get a giant paycheck on a regular basis) for what's withheld for FICA will not reach the level where any withholding is necessary based on that one check. Same for whatever bit gets withheld for state / local tax.

Because this is "supplementary income" (see the link in Wesley's answer), then the 25% flat withhold rule kicks in, and the employer had to withhold even though the income that went to FICA might still be under the usual limit for which it would have to withhold federal income tax. Then you can follow through the calculation the Wesley did and see the see how it all balances out.

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