Learn how to run a bonus payroll and accurately calculate bonus pay and taxes with our comprehensive small business guide. What is a Bonus Plan?A bonus plan is an agreement between the employer and employee to pay out a predetermined amount of money based on performance. Annual Bonuses: Paid out in the first quarter of the following fiscal year. This timing allows for a comprehensive review of the previous year's performance. The IRS views any bonus you receive as wages. This means that almost all bonuses are taxed. In this guide, we'll provide a general overview of Pennsylvania's employment and benefits regulations for small to mid-sized businesses. The Sale Bonus, less required withholding, will be paid to the Executive in a lump sum within 120 days of the date the Sale is consummated (the "Payment Date"). This employee bonus policy template is ready to be tailored to your company's needs and can be a starting point for setting up your employment policies.