A windfall doesn't change the tax brackets for what you made in your W2 though. Each bracket is fixed for various ranges of your income. The windfall in your ex

A windfall doesn't change the tax brackets for what you made in your W2 though. Each bracket is fixed for various ranges of your income. The windfall in your example would be in it's own tax bracket unaffecting everything before it. And I'm pretty sure the windfall would be reported to them too. So yeah, they would already know. Your example isn't accurate.