Last year my bonus was $13,000 and I paid $999 in social Security, $3198 Federal and $732 State (NY).

This year the bonus is $16,000. After I pay a 401K loan of $1,857.86 and Social Security, I would like to know the minimum dollar amount that I can withhold without incurring any penalties (Safe Harbor rules?).

Thank you very much

A bonus of that size is normally subject to a flat 30% withholding.

About 25% was the withholding percentage last year, so you may be able to reduce it to 25% this year, but not much less will be permitted.

You are not subject to any under-withholding penalties if the check you write when you file is $1,000 or less

OR

If you had withheld from your pay at least as much as you owed in income taxes for 2006. This assumes that you have not had a huge increase in your overall income level.

Irrespective of what you have put on W4, bonuses and other supplementary payments are subject to statutory withholding (i.e. by law) at 30% (or 25% I am not sure) for Federal Income Tax. SS and Med are also withheld. Many states now have statutory withholding on bonuses.

The standard lump sum withholding has always been 30%, but it may have been lowered to 25% based on Liz's tax bracket.