Aggregate Method for Taxation of Supplemental Wages

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					                Aggregate Method* for Taxation of Supplemental Wages

Under this method, the employer calculates the amount of withholding due by
aggregating the amount of supplemental wages with the regular wages paid for the
current payroll period or for the most recent payroll period of the year of payment, and
treating the aggregate as if it were a single wage payment for the regular payroll period.
If the supplemental wages are paid concurrently with wages for the current payroll
period, then they must be aggregated with the wages paid for the current payroll period.

Example: An employee who is single and claims 2 withholding allowances, is normally
paid $1,400 in federal income taxable wages during 2008 on a biweekly basis. So far in
2008, the employee has received $14,000 in wages. Between paychecks, the employee
receives a bonus in the amount of $400. Using the aggregate method, the amount of
federal income tax withheld from the bonus payment is calculated this way:

Total of latest wage payment and bonus ($1,400 + $400)               $1,800

Withholding on total amount (wage-bracket method)                        225
Withholding from latest wage payment                                    -141
Withholding from supplemental wage payment                               $84



*IRS Reg. 31.3402(g)-1(a)(6)