Glossary
Supplemental wages
Pay outside your regular wages — bonuses, severance, commissions — which employers may withhold from at a flat rate.
IRS Publication 15 treats bonuses, severance, commissions, awards, and similar payments as supplemental wages. When paid separately from regular pay, employers commonly withhold federal income tax at a flat 22%, rising to a mandatory 37% on supplemental wages above $1 million in a calendar year. Employers may instead use the aggregate method, adding the payment to a regular paycheck and withholding as though the whole amount were ordinary pay. Either way, withholding is a prepayment — the annual return settles the actual tax.