The Basics of Supplemental Pay Taxation
Webinar Details $219
- Rated:
- Webinar Length: 100 Minutes
- Guest Speaker: Vicki Lambert
- Topic: Taxation and Accounting, Human Resources, Payroll
- Credit: HRCI 1.5, SHRM 1.5, ATAHR 1.5, ATAPR 1.5, ATATX 1.5, RCH 1.5
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The Tax Cuts and Jobs Act of 2017 changed the supplemental rate for the first time in many years. However, it did not change the basic requirements for withholding on supplemental wages as laid out by the IRS. And managing the taxation of supplemental pay can be a complex challenge fraught with errors and quite costly to correct. One wrong step by payroll and the company could face severe penalties for everything from failure to withhold the correct tax (bad enough!) to actual wage theft (rare but can happen). This webinar covers the basics for payroll professionals on how to properly tax any supplemental payment including bonuses, severance pay and fringe benefits.
Learning Objectives:
• Understand and be able to distinguish between supplemental wage payments and regular wage payments
• Determine the proper withholding using each of the methods specified by the IRS for supplemental wages.
• Identify and apply the rules to common and not so common examples of supplemental pay.
• Determine when to use each of the different supplemental rates correctly
• Understand the effect of Form W-4 and the payroll period have on supplemental pay withholding
Areas Covered in the Webinar:
• Definitions and examples of supplemental pay
• Detailed calculations on calculating the proper supplemental tax to withhold
• What options are available, when may they be elected, and who decides
• Record keeping requirements for compliance with mandatory flat rate withholding rules
Who can Benefit:
• Payroll Executives/Managers/Administrators/Professionals/Practitioners/Entry Level Personnel
• Human Resources Executives/Managers/Administrators
• Accounting Personnel
• Business Owners/Executive Officers/Operations and Departmental Managers
• Lawmakers
• Attorneys/Legal Professionals
• Any individual or entity that must deal with the complexities and requirements of Payroll compliance issues
- Introduction
- Our Focus For Today 00:01:18
- Bit of History 00:02:52
- Regular Wages - Definition 00:04:47
- Supplemental Wages - Definition 00:06:00
- Exceptions and Options 00:06:52
- 2007 Change Year 00:11:37
- Two Acceptable Methods 00:12:24
- Two Acceptable Methods (Cont’d) 00:15:57
- Supplemental Rates 2020 00:17:21
- Mandatory Flat Rate Method 00:18:26
- Mandatory Flat Rate Method - Example 1 Split Payment 00:20:59
- Mandatory Flat Rate Method - Example 1 Split Payment (Cont’d) 00:22:26
- Mandatory Flat Rate Method - Example 2 Employer Election 00:23:52
- Mandatory Flat Rate Method - De Minimis Payment By Agent 00:26:05
- Mandatory Flat Rate Method - De Minimis Payment By Agent Example 00:27:27
- Mandatory Flat Rate Method 00:31:12
- Aggregate Method Review 00:33:14
- Aggregate Method Review (Cont’d) 00:33:14
- Aggregate Method Review (Cont’d) 00:35:48
- Example 1 - Aggregate Same Time Payments 00:38:12
- Example 2 - Aggregate Pay at Separate Times 00:42:58
- Example 3 - Aggregate Pay at Separate Times 00:45:59
- Example 4 - Alternate Pay 00:48:19
- Reminder: Have Not Withheld Taxes 00:50:58
- Vacation Pay 00:54:20
- Nonresident Aliens 00:58:16
- Fringe Benefits 01:00:36
- State Taxation 01:06:39
- California State Tax, Unemployment, and Payroll Tax 01:07:24
- Arizona State Tax, Unemployment, and Payroll Tax 01:08:12
- 2020 Supplemental Taxation Methods By State 01:08:33
- 2023 Rate Changes So Far… 01:11:52
- Revenue Ruling 2008-29 01:12:43
- Revenue Ruling 2008-29 Scenario 1 01:14:19
- Revenue Ruling 2008-29 Scenario 2 01:17:20
- Revenue Ruling 2008-29 Scenario 3 01:18:58
- Revenue Ruling 2008-29 Scenario 4 01:21:17
- Revenue Ruling 2008-29 Scenario 4 (Cont’d) 01:22:54
- Revenue Ruling 2008-29 Scenario 5 01:23:29
- Revenue Ruling 2008-29 Scenario 6 01:27:07
- Revenue Ruling 2008-29 Scenario 7 01:28:54
- Revenue Ruling 2008-29 Scenario 7 (Cont’d) 01:30:29
- Revenue Ruling 2008-29 Scenario 8 01:30:49
- Revenue Ruling 2008-29 Scenario 9 01:32:37
- Attendee Questions 01:34:58
- Presentation Closing 01:47:29
- Aggregate Method 00:12:53, 00:16:55, 00:33:19, 01:20:56
- AJCA - American Jobs Creation Act 00:03:13
- Alternate Method 00:13:24
- Deferred Compensation 00:11:50
- De Minimis 00:26:54
- Exempt 00:17:09, 01:14:37
- Fair Labor Standards Act (FLSA) 00:05:26, 01:14:32
- Form W-4 00:01:59, 00:12:40, 00:34:59, 00:38:48, 00:43:08
- Fringe Benefits 00:11:57, 01:00:38, 01:06:12
- IRC Section 3402(g) 00:26:05, 01:22:54
- Mandatory Flat Rate Method 00:18:29, 00:31:12, 00:33:58,, 01:21:03
- Nonresident Aliens 00:58:18
- Overtime 00:06:23, 00:07:11
- Regular Wages 00:01:47, 00:03:48, 00:07:08, 00:16:07, 00:33:48, 01:14:26
- Revenue Ruling 2008-29 00:
- Revenue Ruling 2008-29 01:12:58
- Severance Pay 00:01:35, 00:06:32, 01:14:05
- Supplemental Pay 00:01:25, 00:02:57, 00:05:49, 00:06:06, 00:12:16, 00:17:59, 00:31:20, 00:33:46, 00:54:32, 01:28:22
- Tax Cuts and Jobs Act 00:10:21
- Wage 00:10:00, 00:18:09
AJCA - American Jobs Creation Act : The American Jobs Creation Act of 2004 was a federal tax act that repealed the export tax incentive, which had been declared illegal by the World Trade Organization several times and sparked retaliatory tariffs by the European Union.
Aggregate Method: Under the aggregate method of withholding, an employer combines supplemental wages with regular wages and withholds on the total as if it were a single payment for the regular pay period.
Alternate Method: Use the supplemental rate for the wages as required instead of Form W-4 to compute the tax withholding amonut.
De Minimis: Too trivial or minor to merit consideration.
Deferred Compensation: Deferred compensation is an arrangement in which a portion of an employee's income is paid out at a later date after which the income was earned. Examples of deferred compensation include pensions, retirement plans, and employee stock options. (en.wikipedia.org)
Exempt : Exempt employee is a term that refers to a category of employees set out in the Fair Labor Standards Act. They do not receive overtime pay, nor do they qualify for the minimum wage
Fair Labor Standards Act (FLSA): The Fair Labor Standards Act of 1938 29 U.S.C. § 203 is a United States labor law that creates the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibits most employment of minors in "oppressive child labor".
Form W-4: Form W-4 (otherwise known as the "Employee's Withholding Allowance Certificate") is an Internal Revenue Service (IRS) tax form completed by an employee in the United States to indicate his or her tax situation (exemptions, status, etc.) to the employer.
Fringe Benefits: An extra benefit supplementing an employee's salary, for example, a company car, subsidized meals, health insurance, etc.
IRC Section 3402(g): Defines supplemental pay and sets requirements.
Mandatory Flat Rate Method: Employers must use this method for supplemental wages in excess of $1 million during a calendar year. Under this method, employers must withhold on the supplemental wages in excess of $1 million at a rate equal to the highest tax rate applicable under Code Sec. 1 for tax years beginning in the calendar year. Currently, the withholding rate is 37%.
Nonresident Alien (NRA): This income is taxed at a flat 30% rate, unless a tax treaty specifies a lower rate. Nonresident aliens must file and pay any tax due using Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents.
Overtime: Overtime is time and a half of what an employee earns for every hour worked over 40 in a workweek. The FLSA salary threshold is the minimum salary employers must pay employees for them to be exempt from overtime wages.
Regular Wages: "Regular wages" means wages paid by an employer for a payroll period either at a regular hourly rate or in a predetermined fixed amount.
Revenue Ruling 2008-29: Revenue Ruling 2008-29 provides guidance with respect to income tax withholding in nine different situations involving the payment of supplemental wages.
Severance Pay: An amount paid to an employee upon dismissal or discharge from employment. Severance pay is usually given by an employer to its employees who are laid off or terminated for reasons other than firing-for-cause. ... In general, severance pay is up to the employer's discretion and is only legally required under specific circumstances.
Supplemental Pay : Supplemental pay is money given to employees in addition to their regular wages. Supplemental wages include bonuses, commission pay, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retro pay increases, and payments for nondeductible moving expenses.
Tax Cuts and Jobs Act: The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, Pub.L. 115–97, is a congressional revenue act of the United States originally introduced in Congress as the Tax Cuts and Jobs Act, that amended the Internal Revenue Code of 1986.
Wage: A fixed regular payment, typically paid on a daily or weekly basis, made by an employer to an employee, especially to a manual or unskilled worker.
