• Although income taxes on wages are generally withheld using IRS percentage method and the State rate formulas or tables, some taxes are withheld at "supplemental" rates. Those rates may be calculated at either the percentage method or flat rate method, depending upon how the supplemental wages are paid—combined with regular wages, or paid out separately. IRS defines supplemental wages as compensation paid in addition to the employee's regular wages that includes, but is not limited to, severance or dismissal pay, vacation pay, back pay, bonuses, moving expenses, overtime, taxable fringe benefits, and commissions. Currently, the IRS flat supplemental rate is 25 percent.

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