The State Worker

New plan for state worker bonuses should mean a lower tax bite

California state workers won’t lose as much of their $2,500 bonus checks to taxes as they once thought.

Reversing a previous decision, the State Controller’s Office is working to issue the bonuses in such a way that they won’t be taxed at a higher rate than workers normally see on their paychecks.

Next week, the office expects to tell workers when they should see the extra money in their paychecks.

State officials in January told The Bee that bonuses for workers represented by Service Employees International Union Local 1000 would be issued as discrete checks, triggering a higher tax withholding rate because they would be considered supplemental income. That rate would have hit 35 percent between state and federal taxes, eating up $880.75 from the bonuses.

Instead, the controller’s office now plans to combine the bonuses with workers’ regular compensation. As a result, they’ll be taxed at an employee’s normal rate, according to a memo that a transaction manager distributed to state employees last week.

“Tax computations will be based upon a total gross dollar amount between the monthly salary gross combined with the $2,500 one-time bonus; taxes will not be computed at a flat-rate for the bonus itself,” the manager wrote in an April 5 email.

The message cautions that employees should talk with their own tax preparer if they have questions about what the additional money might mean for them when they file taxes next year.

It further said that the bonuses for most employees would be combined with April wages. Taryn Kinney, a spokeswoman for the controller’s office, said employees should learn next week when they’ll receive their bonuses.

Representing approximately 95,000 workers, SEIU 1000 is California state government’s largest union. After calling for a one-day walkout, its leaders in December announced a 42-month contract that raises wages by a total of 11.5 percent.

Adam Ashton: 916-321-1063, @Adam_Ashton

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