Supplemental Pay Essentials – How to Correctly Withhold Tax Bonuses, Commissions, and Severance Pay
Duration: 90 Minutes
This webinar will help attendees distinguish between supplemental wage payments and regular wage payments and assist them to identify wage payments that are neither supplemental nor regular. It will detail methods used to compute withholding on supplemental pay and discuss the application of the rules and methods to specific payments and situations.
Objectives of the Presentation
Why Should you Attend
- Distinguish between supplemental wage payments and regular wage payments and identify wage payments that are neither supplemental nor regular
- Compute withholding using each of the methods specified for supplemental wages
- Be aware of critical options and exceptions to the general rules
- Understand common and not so common examples of supplemental pay and how the rules apply
- Understand how the rules apply to severance pay, deferred compensation, and other post termination payments
- Understand when the 25% flat rate may be used and when it is not allowed
- Understand when the 39.6% flat rate must be used and how to apply it to supplemental wage payments
- Learn how to avoid failure to withhold penalties
Supplemental pay is employee compensation paid in addition to or in place of regular wages or salary. Examples include bonuses, commissions, and fringe benefits. Sometimes an employee receives more than one type of pay during a pay period and some of the pay overlaps or is attributable to multiple pay periods. Complying with supplemental pay regulations can be a headache for any payroll department. Incorrectly reporting supplemental wages can lead to costly penalties, fines and liabilities. Payroll departments often hear complaints of too much withholding from employees and sometimes too little withholding from highly compensated employees. The introduction of mandatory flat rate withholding for certain employees changed the definitions of supplemental and regular wages and created additional recordkeeping responsibilities for employers.
Computing an appropriate amount of withholding for supplemental pay can be a challenge. The rules for withholding from supplemental pay involve compliance issues for employers related to tracking supplemental wages paid to each employee during the calendar year, selecting the appropriate method to compute withholding from supplemental pay, and proper application of options and exceptions to the general rules. Failing to correctly apply the rules can result in costly penalties for failure to withhold the correct amount of tax.
This fast paced and detailed webinar will provide crucial information to effectively manage supplemental wage payments. It will discuss optional methods and when they may be used as well as the effect of Form W-4 claims and regular pay period on supplemental pay withholding.
Who can Benefit
- Definitions and examples of supplemental and regular compensation including optional treatment and exceptions
- Why Congress distinguished supplemental pay and enacted special rules for computing withholding
- Description of methods used to compute withholding on supplemental pay including examples
- When optional methods may be elected and when they may not
- When the mandatory flat rate method must be used and situations in which the employer has options
- The effect of Form W-4 claims and regular pay period on supplemental pay withholding
- Recordkeeping required for compliance with mandatory flat rate withholding rules
- Penalties for failure to withhold and penalty avoidance
- Application of the rules to specific examples of supplemental pay situations
- Payroll Supervisors and Personnel
- Payroll Consultants
- Payroll Service Providers
- Public Accountants
- Internal Auditors
- Tax Compliance Officers
- Enrolled Agents
- 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.