The information posted on PayrollTalk is for informational purposes only and is not intended to substitute for obtaining accounting, payroll, tax, or financial advice from a professional accountant.

supplemental wages/tax rate with IRS lock-in letter

Am I able to use the supplemental withholding rate on a commission payment for an employee with an IRS lock-in letter?

Comments

  • I was not able to quickly find any reference to special rules for supplemental pay with regard to lock in letters. My thinking is that if the employee is (annually) in a tax bracket of 22% or less, you should be OK and may be over withholding for the employee (with respect to the lock in letter) by using the 22% flat rate method. However, if you are concerned that the aggregate method (with respect to a commission) might be withholding too much, it may be safer, from your standpoint, to use a method that will use the locking letter limitations. For example, the cumulative wage method will comply with the lock in letter based on averaging the withholding on the current aggregate amount over the year to date wages (including the current wages).