According to IRS regulations, which of the following is NOT considered a supplemental payment?

In the context of IRS regulations, a supplemental payment is typically considered to be any additional payment made to an employee that is above and beyond their regular wages. These payments generally fall into specific categories that have distinct tax implications.

Shift differentials refer to higher pay that is offered to employees who work undesirable shifts, such as evenings or weekends, but this type of payment is typically classified as part of an employee's regular wages rather than a supplemental payment. It is integrated into the basic pay structure rather than being an additional bonus or separate item.

On the other hand, severance pay, tips, and retroactive pay are recognized as supplemental payments. Severance pay is an additional form of compensation given when an employee is let go, tips are discretionary and usually provided for service, and retroactive pay applies to wages that are owed for prior periods, representing an increase in total earnings for that period.

Thus, shift differentials are not categorized as supplemental payments according to IRS regulations, making this the correct choice in identifying what does not fall under that definition.