What is the W-2 reporting requirement for supplemental wages under $1 million?

What is the W-2 reporting requirement for supplemental wages under $1 million?

• A. No reporting is required
• B. 25% withholding
• C. 22% withholding
• D. 30% withholding

Answer: (C)

For supplemental wages under $1 million, the correct W-2 reporting requirement involves withholding at a flat rate of 22%. This is specified by the Internal Revenue Service (IRS) guidelines, which designate this percentage for supplemental wage payments that are not subject to mandatory higher rates. Supplemental wages include bonuses, commissions, and overtime pay, and the flat rate simplifies the withholding process for employers. This rate remains applicable as long as the total annual supplemental wages do not exceed $1 million. If the supplemental payments exceed this threshold, the withholding requirements may change, typically reflecting a higher percentage. However, for amounts below the $1 million mark, the established flat rate of 22% is the consistent approach mandated by the IRS for tax withholding, providing clarity and uniformity for payroll processing.

For supplemental wages under $1 million, the correct W-2 reporting requirement involves withholding at a flat rate of 22%. This is specified by the Internal Revenue Service (IRS) guidelines, which designate this percentage for supplemental wage payments that are not subject to mandatory higher rates. Supplemental wages include bonuses, commissions, and overtime pay, and the flat rate simplifies the withholding process for employers.

This rate remains applicable as long as the total annual supplemental wages do not exceed $1 million. If the supplemental payments exceed this threshold, the withholding requirements may change, typically reflecting a higher percentage. However, for amounts below the $1 million mark, the established flat rate of 22% is the consistent approach mandated by the IRS for tax withholding, providing clarity and uniformity for payroll processing.