401(k) deferral taxation
I'm looking for some commentary on 401(k) deferral with regard to bonus payments.
When annual bonuses are paid, the amount of 401(k) deferral is based upon the deferral percentage elected under the bonus election. The bonus deferral election is separate from the salary deferral elections. So employees log into the deferral provider and can elect X% deferral on their salary and X% on their bonus deferral.
I'm concerned how the HRIS system is calculating bonus checks for employees who defer 100% of their bonus earnings. I want to know if the HRIS programming is correct for paycheck taxes. I did some research and can't find the correct method of taxation.
Employee bonus = $2,269.55
401(k) Deferral % = 100% amount w/h = 2,006.09
Medicare tax w/h = $32.91
SS tax w/h = $140.71
State tax w/h = $23.98
Federal tax w/h = $65.86
I determined what the HRIS system is doing. It's satisfying the FICA tax obligation, calculates an amount of 401(k) withholding and leaves enough money to satisfy 25% withholding for federal taxes and CT state taxes. The difference between $2,269.55 - $2,006.09 = $263.46. That is the taxable wages of the paycheck. 25% of that is $65.86.
Is this the only way to calculate the check correctly according to IRS for deferrals of 100%?