Final regulations issued for withholding on supplemental wages

✍ Scribed by Shirley Dennis-Escoffier

• Publisher: John Wiley and Sons
• Year: 2006
• Tongue: English
• Weight: 86 KB
• Volume: 18
• Category: Article
• ISSN: 1044-8136
• DOI: 10.1002/jcaf.20283

✦ Synopsis

Final regulations that take effect on January 1, 2007, provide important guidance for employers in determining the amount of income tax to withhold on supplemental wages. The American Jobs Creation Act of 2004 (AJCA) increased the withholding rate from 25 percent to 35 percent once an employee's supplemental wages (such as commissions or bonuses) exceed $1 million for the year. Although these rules were intended to impact only employees making over $1 million, the final regulations provide guidance useful to all employers in identifying which payments are supplemental wages eligible for alternative withholding rules, as well as providing examples illustrating the correct procedures for withholding on all levels of supplemental wages.