Coping with Tax Withholding: Withholding on Supplemental Wage Payments

When paying wages that supplement an employee’s standard income, such as when employers pay bonuses, commissions, awards, and even overtime pay and severance, employers can use the supplemental federal tax rate instead of wage withholding tables. The hit on the employee can be especially hard—with state withholding and FICA taxes included, reduction of the total by nearly 40% is impactful. The federal supplemental withholding rate is 22%. Amounts over $1 million are taxed at the highest individual tax rate: 37%. Ouch!

Read now »

Related Content

• Wage Withholding Provisions State Law Survey
  Learn more about the general withholding requirements in each state and the extent to which each state conforms to the federal withholding provisions, particularly with respect to the W-4 form, along with the state form requirements. 

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.   

• Tax Key Legal Developments Tracker (Federal)—keep up to date with key legal developments!
  • Business Entities. IRS provides the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month (April) for purposes of I.R.C. § 1274(d). Rev. Rul. 2024-07.
  • Practice, Procedure, and Controversy. Treasury Department and the IRS invite the public to submit recommendations for items to be included on the 2024-2025 Priority Guidance Plan. I.R.S. Notice 2024-28.
  • Tax-Exempt Organizations. IRS announces revocation of certain R.C. § 501(c)(3)Organizations for failure to meet the code section requirements. Contributions made to the organizations by individual donors are no longer deductible under I.R.C. § 170(b)(1)(A). Announcement 2024-12.
• DID YOU KNOW? Trying to address misrepresentations by companies advertising to taxpayers that their food plans are “tax deductible,” the IRS released FAQson medical expenses related to nutrition, wellness, and general health to determine whether a food or wellness expense is a reimbursable (by a health FSA or an HSA) medical expense.
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts. 

• For related Practical Guidance content on important recent trends, please review these easy-to-use Resource Kits on a variety of emerging topics:
  • Generative Artificial Intelligence (AI) Resource Kit
  • Environmental, Social, and Governance (ESG) Resource Kit
  • Public Interest, Pro Bono, and Non-Profit Resource Kit
  • Bank Failure Resource Kit

• Explore the Practical Guidance Journal Spring 2024 Edition, featuring guidance on protecting attorney-client privilege and work product in a generative AI world, using AI to manage the attorney client relationship, an overview of privacy regulations in the United States, and a primer on the new Corporate Transparency Act requirements.
• Learn about the 2000+ leading attorney authors contributing to our 26 practice areas in the Practical Guidance Author Center. Interested in becoming a Practical Guidance author? Click here for details. Practical Guidance is committed to amplifying diverse voices of attorneys across all differences, including gender and race.  
• Legal Developments provide the latest updates and analyses of emerging topics impacting your practice area. Visit the Legal Developments page to see the latest topics, which also include breaking legal news and related Practical Guidance content. 
• Listen Up! The Practical Guidance and Law360 Podcasts Resource Kit features interviews with industry-leading attorneys on innovative issues in the law: NFTs, Artificial Intelligence, and more.

• New and Recently Updated Practical Guidance Content
  • Conservation Easements, Donor Advised Funds, and Sponsoring Organizations: Governing Principles
  • Partnership Taxation: Partner Contributions under Code Section 721(a)
  • Labor Department Releases Independent Contractor Final Rule, Revising Standard
  • U.S. Treasury Launches Website Tracking Tax Guidance under "Inflation Reduction Act"

PRACTICAL GUIDANCE CUSTOMER EMAIL EDITION ON THE WEB

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+