Withhold on Supplemental Wages

Author: Rena Pirsos, XpertHR Legal Editor

Key Points

  • Supplemental wages are payments made by an employer in addition to an employee's regular wages (e.g., bonuses, commissions, overtime pay, severance pay, noncash fringe benefits, sick pay paid by a third party as the employer's agent).
  • An employer must keep track of any supplemental wages paid to an employee because different income tax withholding rules apply, depending on the total amount of supplemental wages an employee receives in a year.
  • While many states allow flat-rate withholding from supplemental wages at varying rates, some states require supplemental wages to be aggregated with regular wages, and a few states do not provide a supplemental tax rate at all.

XpertHR Resources