Holiday bonuses can bring a bout of stress when determining how to corectly tax the amount, here’s a refresher on supplemental wage tax
In honor of the upcoming holidays, which inevitably brings about the question of holiday bonuses, we thought it an appropriate time to discuss supplemental wages. Any compensation paid in additional to regular wage/earnings is considered supplemental wages. This includes sick pay, vacation pay, commissions, and bonuses.
Employers have options when paying supplemental wages. They can combine the supplemental wages with the regular pay and have it taxed under one bracket. However, if an employer decides to separate supplemental wages from regular pay, the supplemental wage then gets taxed at flat federal rate of 25%, plus additional state tax. For more information on how to handle supplemental wages, contact StaffScapes at (303) 466-7864.