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What Is a Supplemental Wage?

October 18th

As an employer, keeping track of taxes and out of tax debt can be confusing. There are different classifications of employees that require adherence to different tax laws, and there are also different classifications of wages that require different rules. In order to have a financially stable business that is congruent with current tax laws, it is important to keep track of the different kinds of wages that you pay your employees and the tax regulations surrounding those wages.


The Definition of a Supplemental Wage

According to the IRS, a supplemental wage is defined as any sort of wage payments to employees that are not regular wages. For examples of supplemental wages, think about bonuses, commissions, overtime pay, payments for accumulative sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. There are even more ways that an employee can receive supplemental wages; if you are confused as to what counts as a supplemental wage and what does not, it is advisable to contact the IRS through their website at www.IRS.gov. Another good source of information regarding supplemental wages is the Employer’s Tax Guide, which is a free publication that can be found on the IRS website.  You may also contact a local tax attorney or tax lawyer to have a more tailored conversation regarding supplemental wages.

Supplemental wages are generally subject to the same kind of taxes that regular wages are. However, if an employee receives more than $1 million in supplemental wages from their employer during the calendar year, there are certain provisions that must be made. Be sure to contact the IRS should this situation apply to you.


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