Supplemental Pay Tax Withholding Requirements

According to Internal Revenue Regulations, supplemental pay tax withholding may be calculated by applying the employee’s withholding rate from the Form W-4 on file or utilizing the flat rate withholding method, currently 28% federal plus 6% for Utah. Supplemental pay is an additional amount to regular pay, separately stated, and includes, but is not limited to, bonuses, commissions, severance, vacation payouts, retroactive wages, retroactive increases, overtime or differentials. Clinical Incentive Pay would also be considered supplemental pay.

If an employee wishes to adjust his/her employee withholding allowance certificate, Form W-4, this can be completed before the supplemental pay is prepared via the PeopleSoft employee tab at Payroll, Taxes and Salary. Please inform the employee that the new Form W-4 will continue to be in effect until changed. For example, if the employee wishes to decrease payroll withholding taxes for a certain pay period, the employee would increase the Form W-4 allowances. After such pay period is processed, the employee would resubmit the original Form W-4 allowances.

In the alternative, an employee can request the flat rate withholding method for the supplemental pay. On the PAN form, for retroactive pay, vacation payouts or severance pay, please note in the comments box “Please use flat rate calculation.” On all other pay forms, including the paper timesheet, please check mark the box under the chartfield that states “check this box for flat rate calculation.”

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