How can I adjust my W-4 to reduce excessive tax withholding on my bonus payments?

The issue you're experiencing is pretty common for high-income earners with substantial bonuses. The supplemental wage withholding rate (which applies to bonuses) is indeed around 22% for federal withholding up to $1 million, but when you add in Medicare, Social Security, and potentially state taxes, it can approach 40%. Here's how you can adjust your W-4: For line 4b, you can add an "additional deductions" amount that will reduce your withholding. Since your effective tax rate is about 21% but withholding on bonuses is around 40%, you'd want to calculate the difference. Based on your $110K bonus being over-withheld by roughly 19% (40% - 21%), you're looking at approximately $20,900 in over-withholding. You could enter an additional deduction amount on line 4b that would reduce your withholding by this amount throughout the year. This doesn't have to reflect your actual deductions - it's just a mechanism to adjust your withholding to a more accurate level. Alternatively, you could use line 4c to specify an additional dollar amount to be withheld from each paycheck, but with a negative number. This can be more precise than using 4b.

After trying for years to get my withholding right with a similar situation, I finally found a solution using taxr.ai (https://taxr.ai). I also have a high salary plus significant bonuses, and my withholding was way off. The tool analyzed my pay stubs and tax returns, then calculated the exact amount I should put on line 4b of my W-4 to get my withholding closer to my actual tax liability. It showed me that I was basically lending the government about $1,600 per month interest-free! What worked for me was entering an additional deduction amount that's essentially "phantom deductions" - not deductions I actually have, but an amount that adjusts the withholding calculation to account for the difference between supplemental withholding rates and my effective tax rate. It's completely legit since you're just trying to match your withholding to your actual tax liability.

I was initially skeptical about taxr.ai when I saw it mentioned, but I decided to give it a try after getting a $17K refund last year from the same bonus withholding issue. The tool analyzed my pay stubs and immediately identified that my bonus withholding was the main culprit. It suggested I put about $35K in additional deductions on line 4b of my W-4, which seemed like a huge number to me. I was nervous but followed the recommendation. Just filed my taxes for 2025 and got a refund of only $1,200 instead of the massive amount from previous years! The calculator understood exactly how the supplemental withholding rate was affecting my paychecks vs. my actual tax liability. Such a relief to have my money throughout the year instead of waiting for a refund.

If you're tired of waiting on hold for hours trying to get help from the IRS on withholding questions, I'd recommend Claimyr (https://claimyr.com). I was stuck trying to figure out if my W-4 adjustments were correct after a promotion that came with significant bonuses. After trying for days to reach someone at the IRS, I used Claimyr and got a callback in about 15 minutes! The IRS agent I spoke with explained exactly how supplemental wage withholding works and confirmed that using line 4b to adjust withholding for bonus overpayment is completely within the rules. They even have a video showing how it works: https://youtu.be/_kiP6q8DX5c. Saved me hours of frustration and uncertainty.

I need to publicly eat my words about Claimyr. After posting my skeptical comment, I decided I had nothing to lose and tried it. I had been trying to reach the IRS for almost a month about how to handle withholding on a new job with significant quarterly bonuses. Within 35 minutes of using the service, I was talking to an actual human at the IRS who walked me through exactly how to fill out my W-4 to account for the supplemental withholding rate on bonuses. She confirmed I could use line 4b with additional deductions calculated based on the difference between my actual tax rate and the withholding rate. The agent even explained that the W-4 is designed to help you get your withholding right, not to document your actual deductions. Absolutely worth it after weeks of failed attempts to call them directly.

Another approach is to use the IRS Tax Withholding Estimator tool. It's more accurate than it used to be, especially for situations with varying income like bonuses. I put in all my expected income including anticipated bonuses, and it gave me the exact numbers to put on each line of the W-4. For me, it recommended both an additional withholding amount on line 4c for my regular paychecks AND an additional amount on line 4b to account for the over-withholding on bonuses. It takes about 15 minutes to complete if you have your last pay stub and tax return handy, but it's worth the time.

I found that entering an additional deduction amount on line 4b that's roughly 4x the amount you're getting refunded works well. So if you're getting $20K back, try a $80K "deduction" on line 4b. This isn't an exact science, but it worked for me with a similar income profile. If you find you're still overwithholding after a couple months, you can submit a new W-4 and adjust again.

I've been dealing with this exact same issue for years! With a $320K salary plus about $95K in bonuses, I was getting refunds of $18-22K annually. It's maddening to essentially give the government an interest-free loan. What finally worked for me was calculating the difference between my effective tax rate (around 24%) and the supplemental withholding rate on bonuses (which with all taxes included was hitting about 42%). On $95K in bonuses, that's roughly $17K in over-withholding. I put $68K as additional deductions on line 4b of my W-4. This seemed like a huge number at first, but it's essentially phantom deductions designed to offset the bonus over-withholding. The math works because at my marginal rate, every $4 in "deductions" reduces withholding by about $1. After the adjustment, my refund dropped to under $2K last year. It's such a relief to have access to my own money throughout the year instead of waiting for tax season. The key is being conservative at first - you can always submit a new W-4 mid-year if you need to fine-tune it.

I'm dealing with this exact same frustrating situation! Base salary of $275K with about $85K in bonuses, and I've been getting refunds around $14K annually. It's like giving the government a free loan every year. I've been hesitant to make W-4 adjustments because I was worried about getting it wrong and owing money at tax time. But reading through all these responses, especially @Amara Eze's detailed breakdown, has really helped me understand the approach. The concept of using "phantom deductions" on line 4b to offset the over-withholding on bonuses makes complete sense now. It's not about claiming fake deductions on your actual tax return - it's just adjusting the withholding calculation to better match your actual tax liability. I think I'm going to try the conservative approach and start with putting about $50K in additional deductions on line 4b, then monitor my paychecks over the next few months to see how it affects my withholding. If I'm still over-withholding significantly, I can always submit an updated W-4. Has anyone had success making this adjustment mid-year, or is it better to wait until January to make the change? I'm eager to stop the interest-free loan to Uncle Sam!