Is a Post-Departure Bonus Still Taxable?
Yes. A bonus paid by a former employer after you leave is still taxable income. It is treated as supplemental wages from that employer, subject to the flat 22% federal withholding rate, FICA taxes, and applicable state taxes. The fact that you are no longer employed does not change the tax classification.
Your former employer is legally required to withhold federal and state income taxes from any post-departure wage payments, including bonuses. They must also pay their share of FICA taxes. The bonus will appear on your W-2 from that employer for the year in which it is paid.
Types of Post-Departure Payments and Their Tax Treatment
Post-departure payment types and tax treatment
| Payment Type | Tax Treatment | Withholding |
|---|---|---|
| Deferred performance bonus | Ordinary income — supplemental wages | 22% flat federal + FICA + state |
| Commission on pre-departure sales | Ordinary income — supplemental wages | 22% flat federal + FICA + state |
| Severance pay | Ordinary income — supplemental wages | 22% flat federal + FICA + state |
| Final PTO cash-out | Ordinary income — supplemental wages | 22% flat federal + FICA + state |
| Non-compete payment | Ordinary income — potentially other income | Withholding varies — may be reported on 1099 |
| COBRA premium reimbursement | May be non-taxable if under plan rules | No withholding if properly excluded |
Which Year’s Taxes Does the Bonus Belong To?
The bonus is taxed in the year it is paid — not the year it was earned or accrued. If you left in October and received your performance bonus in February of the following year, the bonus is February income — taxable in the new year. This can be favorable if your new year income starts lower than the year you left.
- Payment date determines the tax year — not the date earned or accrued
- A February bonus from a prior year’s performance is taxed in the year of payment
- Your W-2 from the former employer reflects wages in the year paid
- If you now have lower income in the new year, the bonus may be taxed at a lower marginal rate
- Verify the former employer has your current mailing address to receive your W-2 in January
What If Your Former Employer Does Not Withhold?
If a former employer pays a bonus without withholding taxes, report the full amount as wages on your tax return. Make an estimated tax payment immediately to avoid underpayment penalties. Contact the former employer to ensure a correct W-2 is issued for the full wages paid. If they refuse, file Form 4852 as a substitute W-2.
Calculate Tax on Your Post-Departure Bonus
Enter the bonus amount and your new income level for the year to see the actual tax impact.