Transcript Supplemental Wage Withholding

Supplemental Wage
Withholding
An Overview
Presented to NH Government Finance Officers Assoc.
John W. Hart
Internal Revenue Service
Federal, State & Local Government
Office (978) 474-9590
Email: [email protected]
What are supplemental Wages?
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Employee wages consist of both regular and
supplemental wages.
Regular wages include compensation paid at a
regular hourly, daily or similar predetermine and
fixed amount.
Wages that vary from pay period are
supplemental wages; although employers may
treat reported tips and overtime pay as regular
wages.
Examples of Supplemental Wages
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Bonuses
Commissions
Back wages
Tips (can be treated as regular
wages)
Overtime pay (can be treated
as regular wages)
Differential wage payments
Noncash fringe benefits
Amounts includable in gross
income under IRC 409A
Imputed income amounts for
health insurance coverage for
nondependents
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Sick pay paid by a third party
agent of the employer
Income recognized on the
exercise of a nonstautory stock
option
Nonqualified deferred
compensation or wages
deferred under a retirement
plan pursuant to a salary
reduction agreement
Wages paid under
reimbursement or other
expense allowance
arrangements that are made
under a non accountable plan
Supplemental Withholding Methods
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Mandatory flat rate withholding at the rate of 35% is
required when supplemental and regular wages exceed
$1,000,000 annually
Optional withholding at a 25% rate is allowable when
regular and supplemental wages total less than or equal
$1,000,000 annually and the employer has paid regular
wages to the employee in the current or immediately
preceding year
Aggregate withholding is permitted in all scenarios when
regular and supplemental wages total less than or equal
$1,000,000 annually
Payments Made by Agents
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Payments made by agents of the employers
must be considered in determining the
applicability of mandatory withholding.
An optional de minimis exception is allowed for
both employers and agents when an agent
making wage payments, including regular and
supplemental wages of less than $100,000 to an
individual in a calendar year.
Additional Guidance
Revenue Ruling 2008-29 provides guidance
with respect to income tax withholding in nine
different situations involving the payment of
supplemental wages.
Regulation 31.3402(g)-1 sets out all the rules
on income tax withholding involving the
payment of supplemental wages.