Overview
Supplemental pay includes compensation such as overtime premiums, bonuses, severance pay and fringe benefits. It is an important component of employee compensation but has its own set of withholding rules. This training program will help attendees distinguish between supplemental wage payments and regular wage payments and help them 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.
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.
Learning Objectives
This webinar will help you
- 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.
- Apply critical options and exceptions to the general rules.
- Identify and apply the rules to common and not so common examples of supplemental pay.
- Apply the rules to severance pay, deferred compensation, and other post termination payments.
- Determine when the 22% flat rate may be used and when it is not allowed.
- Determine when the 37% flat rate must be used and how to apply it to supplemental wage payments.
- Avoid failure to withhold penalties.
Why Should You Attend
Computing an appropriate amount of withholding for supplemental pay can be a challenge. 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. 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 use to compute withholding from supplemental pay, and proper application of options and exceptions to the general rules. Failure to know and correctly apply the rules can result in costly penalties for failure to withhold the correct amount of tax.
Areas Covered
Topics covered include:
- The reasons Congress enacted special rules for withholding from supplemental pay.
- Definitions and examples of supplemental and regular compensation.
- Methods used to compute withholding on supplemental pay including examples.
- Optional methods – when they may be elected and when they may not.
- Application of the mandatory flat rate method and employer 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.
