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How to Withhold on Supplemental Wages Using the Optional Flat Rate Method

Author: Alice Gilman

Employees often receive payments in additional to their regular wages (i.e., bonuses). These additional payments are called supplemental wages. Under IRS rules, wages that vary from pay period to pay period (e.g., overtime, commissions, bonuses and reported tips) are always treated as supplemental wages. In addition to bonuses, overtime, commissions and reported tips, supplemental wages include the following payments: