Available for Basic Payroll, Full Service Payroll
Supplemental pay is any money that is not tied to an employee’s regular rate, such as a bonus or commission. When running a payroll, you have the option to tax supplemental pay in one of two ways:
At the same federal and state tax frequency as the employee’s normal pay (i.e. weekly, biweekly, etc.)
At the IRS supplemental federal and state tax rates
IRS Publication 15 explains the types of earnings that should be taxed at the supplemental tax rate. The current federal supplemental tax rate is 22%. Patriot Software will calculate the correct federal and state supplemental tax rate automatically.
Read our blog article: What You Need to Know About Supplemental Wages and Supplemental Tax Rates by State and When to Use Them for more info.
How to Tax Money at a Supplemental Rate
Go to Payroll > Run a New Payroll.
For the employee you want to pay, enter the dollar amount in the appropriate money column.
Check the box for “Supplemental Flat Rate Tax.“
Proceed with payroll.
How to Change the Pay Frequency of a Supplemental Pay Type
Patriot calculates federal income tax withholding based on the employee's pay schedule frequency. For supplemental pay like bonuses or commissions, you may want taxes calculated on a different frequency (such as monthly or quarterly) than the employee's regular pay schedule uses. To do this, you temporarily change the employee's pay schedule before running the off-cycle payroll, then restore it afterward.
Only use this process when running the bonus or commission as an off-cycle payroll, separate from normal salary or hourly payroll.
Steps
Change the employee's pay schedule to the frequency you want used for the tax calculation (for example, monthly or quarterly).
Run an off-cycle payroll to pay only the bonus or commission amount.
Change the employee's pay schedule back to the original frequency.