Dresser & Associates is Now Part of Net@Work!
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Net@Work | Dresser & Associates
We are extremely pleased to announce that Dresser & Associates has joined Net@Work, one of the most respected Sage Software Partners in North America and an award-winning end-to-end technology solutions provider. You will see very little change relative to your Sage Software support, really just a name change.

Our existing staff will all be joining Net@Work and will continue to provide the excellent level of service and support our customers have come to expect. Our entire team is very excited about joining Net@Work and the ability to bring even more knowledge and resources to all of our clients.

Thank you for your continued business and we look forward to our ongoing relationship.

Mark F. Dresser, Dresser & Associates, Inc | mfdresser@dresserassociates.com
Read Message from Mark Dresser | Read the Full Press Release | Visit Us at www.netatwork.com
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Wage Tax Info

Supplemental Wage (Bonus) Withholding

Access the federal and state withholding methods for calculating taxes on supplemental wages.

  • Federal Withholding Methods
  • State Withholding Methods

PROBLEM: If an employee is paid non-recurring compensation in addition to regular wages, the amount of Federal income tax calculated on the combined payment might be disproportionately high. That is, the latter tax might exceed the sum of tax amounts calculated separately on EACH payment. The combined wage payment might put the employee into a higher percentage withholding range. Therefore, the I.R.S. and many states offer alternative withholding calculations when supplemental wages are paid.

Examples of supplemental wage payments: bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases for current employees, and payments for non- deductible moving expenses.



Federal Withholding Methods

How to withhold on supplemental payments for Federal income tax purposes, depends on whether the payment is set up as an amount separate from the regular wages. There are two possibilities:

  • If the supplemental wages are COMBINED with regular wages in a single payment, without identifying the amount of each, income tax is withheld as if the total were a single payment for a regular payroll period.
  • If the supplemental wages are PAID SEPARATELY (or combined in a single payment, but the amount of each is specified), the income tax withholding method depends partly on a second question: whether income tax is being withheld specifically from the regular wages.
  1. Where income tax is WITHHELD from the regular wages, then use either of the following methods for the supplemental wages:
    • Withhold at a flat rate of 25.0% for payments made on and after May 28, 2003 (no other percentage allowed)
    • However, effective January 1, 2005, if the supplemental wage payments to an employee during the year exceed $1 million, the applicable flat withholding rate is 35% on the excess. OR add the supplemental to the regular wages for the most recent payroll period this year. Figure the income tax withholding as if the total were a single payment. Subtract the tax already withheld for the regular wages. Withhold the remaining tax from the supplemental wages.
  2. Where income tax is NOT WITHHELD from the employee's regular wages, income tax is withheld as if the total were a single payment for a regular payroll period.

Regardless of the method used to withhold income tax on supplemental wages, Social Security, Medicare and FUTA taxes apply to such payments.

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State Withholding Methods

States which have an income tax withholding provision for supplemental wage payments generally follow the Federal methods. However, the state may authorize a different flat withholding percentage, as follows:

State Withholding Percentage
Alabama 5%
Alaska No personal income tax
Arizona No flat rate provision
Arkansas 7%
California 6% (9.3% for BONUSES and earnings from STOCK OPTIONS)
Colorado 4.63%
Connecticut No flat rate provision
Delaware No flat rate provision
District of Columbia No flat rate provision
Florida No personal income tax
Georgia 2, 3, 4, 5 or 6%
Hawaii No flat rate provision
Idaho 7.8%
Illinois 3%
Indiana 3.4%
Iowa 6%
Kansas 5%
Kentucky No flat rate provision
Louisiana No flat rate provision
Maine 5%
Maryland MD resident = 5.50% plus county W/H rate
Massachusetts 5.3%
Michigan 4.35%
Minnesota 6.25%
Mississippi No flat rate provision
Missouri 6%
Montana 6%
Nebraska 5%
Nevada No personal income tax
New Hampshire No personal income tax
New Jersey No flat rate provision, but W/H at 9.9% for pay over $500,000
New Mexico 4.9%
New York Various rates depending on municipality of residence
North Carolina 6%
North Dakota 3.92%
Ohio 3.5%
Oklahoma 5.5%
Oregon 9%
Pennsylvania 3.07%
Puerto Rico No flat rate provision
Rhode Island 7%
South Carolina 7%
South Dakota No personal income tax
Tennessee No personal income tax
Texas No personal income tax
Utah No flat rate provision
Vermont 7.2% or 9.5%, depending on Federal rate applied
Virginia 5.75%
Washington No personal income tax
West Virginia 3 to 6.5%
Wisconsin 4.6, 6.15, 6.5, or 6.75%
Wyoming No personal income tax
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Article from www.adp.com

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Dresser & Associates is a leading provider of HR Software & Payroll Solutions to New England, the Mid Atlantic, South East and Gulf Coast.

243 U.S. Route 1, Scarborough, Maine 04074 | Toll Free: 866-885-7212 | iamcetsisareoo@essrcfs.odn

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