Supplemental Wages

Supplemental wages are payments other than regular salary or hourly pay, such as bonuses, commissions, overtime, severance, back pay, awards and reported tips. The IRS lets employers withhold federal tax on them at a flat 22%.

Supplemental wages over $1 million in a year are withheld at 37%, whatever your W-4 says. Employers choose between the flat rate method and the aggregate method. Either way, Social Security and Medicare apply. The FAQ covers what counts as supplemental wages.

Many states set their own flat rate for supplemental pay. See whether bonuses are taxed differently and try the bonus tax calculator or the gross-up calculator. Tips count too, as the FAQ on whether tips are taxed explains.