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Coping with Tax Withholding: Withholding on Supplemental Wage Payments

April 02, 2024 (2 min read)

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!

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