Supplemental Pay Essentials: Special Withholding Rules For Bonuses, Severance Pay, Commissions And Fringe Benefits

Supplemental wage withholding follows its own rules. Supplemental pay, such as overtime premiums, bonuses, commissions, severance pay and fringe benefits, is a key part of compensation, but it is taxed differently from regular wages.

This 90-minute payroll webinar explains why Congress created special withholding rules, how to tell supplemental payments from regular wages, and how to spot payments that are neither. You'll learn each method for computing withholding, when optional methods may and may not be used, how the mandatory flat rate works, and how Form W-4 claims and the regular pay period affect the result.

Worked examples apply the rules to specific situations, including severance, deferred compensation and other post-termination payments.

• Distinguish supplemental wages from regular wages and identify payments that are neither
• Compute withholding using each method for supplemental wages
• Apply key options and exceptions to the general rules
• Apply the rules to severance pay, deferred compensation and other post-termination payments
• Determine when the 22% flat rate may be used and when it is not allowed
• Determine when the 37% flat rate is required and apply it
• Avoid failure-to-withhold penalties

• Why Congress enacted special withholding rules for supplemental pay
• Definitions and examples of supplemental and regular compensation
• Methods for computing withholding on supplemental pay, with examples
• Optional methods: when they may and may not be elected
• The mandatory flat rate method and employer options
• How Form W-4 claims and the regular pay period affect supplemental withholding
• Recordkeeping required for mandatory flat rate withholding
• Penalties for failure to withhold and how to avoid them
• Applying the rules to specific supplemental pay situations

Getting supplemental pay withholding wrong can lead to failure-to-withhold penalties. Knowing when the 22% flat rate is allowed, when the 37% rate is mandatory, and what records to keep helps you stay compliant.

This session suits payroll supervisors and staff, payroll consultants and service providers, public accountants and enrolled agents, auditors, tax compliance officers, benefits administrators, and owners and managers with payroll oversight.

• Payroll Supervisors and Personnel
• Payroll Consultants
• Payroll Service Providers
• Public Accountants and Enrolled Agents
• Internal Auditors
• Tax Compliance Officers
• Employee Benefits Administrators
• Officers and Managers with Payroll or Tax Compliance Oversight
• Company / Business Owners
• Managers/ Supervisors
• Public Agency Managers
• Audit and Compliance Personnel / Risk Managers

Patrick Haggerty is a tax practitioner, author, and educator. His work experience includes non-profit organization management, banking, manufacturing accounting, and tax practice. He began teaching accounting at the college level in 1988. He is licensed as an Enrolled Agent by the U. S. Treasury to represent taxpayers at all administrative levels of the IRS and is a Certified Management Accountant. He has written numerous articles and a monthly question and answer column for payroll publications. In addition, he regularly develops and presents webinars and presentations on a variety of topics including Payroll tax issues, FLSA compliance, information returns, and accounting.