What percentage is withheld for supplemental income under $1 million?

The correct percentage for withholding on supplemental income under $1 million is indeed 22%. The IRS has established this rate for the withholding of Federal income tax on various types of supplemental wages, including bonuses and commissions, as part of their guidelines for employers.

This flat withholding rate of 22% simplifies the process for both employers and employees, ensuring that there is a consistent approach to tax withholding on these types of income. The determination of this rate is important for payroll professionals as it affects how much tax is withheld on certain payments, helping to avoid under-withholding which could lead to a tax liability for employees when they file their tax returns.

The other percentages listed, while they may appear in other contexts (such as for different income levels or specific types of income), do not apply to supplemental wages under the parameters set by the IRS as of the last updates prior to October 2023. Understanding the specific rates applicable to various types of income ensures compliance with tax regulations and assists in accurate payroll processing.