Live Webinar

The Basics of Supplemental Pay Taxation

Webinar Details $219

  • Webinar Date: July 14, 2022
  • Webinar Time: 2:00pm - 3:40pm EDT   live
  • Webinar Length: 100 Minutes
  • Guest Speaker:   Vicki Lambert
  • Topic:   Taxation and Accounting, Human Resources
  • Credit:   HRCI 1.5, SHRM 1.5, CPE 2.0, ATATX 1.5, ATAPR 1.5, RCH 1.5
All Access Membership

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

  • Aggregate Method 00:10:23
  • AJCA - American Jobs Creation Act 00:02:54
  • Alternate Method 00:10:27
  • De Minimis 00:19:56
  • Form W-4 00:10:50, 00:40:37
  • Fringe Benefits 00:45:18
  • IRC Section 3402(g) 00:02:32
  • Mandatory Flat Rate Method 00:15:01
  • Nonresident Aliens 00:43:45
  • Regular Wages 00:08:59
  • Revenue Ruling 2008-29 00:51:31
  • Supplemental Pay 00:01:22
  1. Introduction
  2. Our Focus For Today 00:01:12
  3. Bit of History 00:02:32
  4. Regular Wages - Definition 00:03:21
  5. Supplemental Wages -  Definition 00:05:30
  6. Exceptions and Options 00:07:21
  7. 2007 Change Year 00:08:48
  8. Two Acceptable Methods 00:10:14
  9. Two Acceptable Methods (cont’d) 00:12:37
  10. Supplemental Rates 2020 00:14:03
  11. Mandatory Flat Rate Method 00:15:01
  12. Mandatory Flat Rate Method - Example 1 Split Payment 00:15:58
  13. Mandatory Flat Rate Method - Example 1 Split Payment (cont’d) 00:16:33
  14. Mandatory Flat Rate Method - Example 2 Employer Election 00:18:03
  15. Mandatory Flat Rate Method - De Minimis Payment By Agent 00:19:18
  16. Mandatory Flat Rate Method - De Minimis Payment By Agent Example 00:20:45
  17. Mandatory Flat Rate Method 00:22:37
  18. Aggregate Method Review 00:25:13
  19. Aggregate Method Review (cont’d) 00:26:06
  20. Example 1 - Aggregate Same Time Payments 00:28:56
  21. Example 2 - Aggregate Pay at Separate Times 00:29:55
  22. Example 3 - Aggregate Pay at Separate Times 00:34:32
  23. Example 4 - Alternate Pay 00:35:50
  24. Reminder: Have Not Withheld Taxes 00:39:37
  25. Vacation Pay 00:40:41
  26. Nonresident Aliens 00:43:40
  27. Fringe Benefits 00:45:18
  28. State Taxation 00:46:04
  29. California State Tax, Unemployment, and Payroll Tax 00:47:07
  30. Arizona State Tax, Unemployment, and Payroll Tax 00:47:29
  31. 2020 Supplemental Taxation Methods By State 00:48:03
  32. Revenue Ruling 2008-29 00:51:31
  33. Revenue Ruling 2008-29 Scenario 1 00:52:41
  34. Revenue Ruling 2008-29 Scenario 2 00:53:33
  35. Revenue Ruling 2008-29 Scenario 3 00:54:26
  36. Revenue Ruling 2008-29 Scenario 4 00:55:38
  37. Revenue Ruling 2008-29 Scenario 4 (cont’d)  00:56:46
  38. Revenue Ruling 2008-29 Scenario 5 00:57:07
  39. Revenue Ruling 2008-29 Scenario 6 00:58:11
  40. Revenue Ruling 2008-29 Scenario 7 00:58:51
  41. Revenue Ruling 2008-29 Scenario 7 (cont’d) 00:59:01
  42. Revenue Ruling 2008-29 Scenario 8 00:59:12
  43. Attendee Questions 01:00:35
  44. Presentation Closing 01:13:13

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.

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.

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.

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.

Guest Speaker

  • Vicki M. Lambert, CPP