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How do I set up bonus pays or supplemental wages to be taxed at a specific rate in US Payroll?

Created on  | Last modified on 

Summary

Supplemental wages are those pays included on an employee's check that should be taxed at a flat federal and/or state withholding tax rate. To create supplemental wages for a check, follow the steps below.

Resolution

Note: This solution is only available for United States installations of Sage 300 Construction and Real Estate.

Setup the pay as Supplemental:

  1. From the Payroll Setup menu, select Pays.
  2. Select the pay that is to be taxed at the supplemental rate, or if this is a new pay ID, enter the new Pay ID.
    1. For the Pay type select Other.
    2. Select the Supplemental check box.
    3. Enter the applicable GL Expense account.
    4. Click Save and Close.

Specify a supplemental tax rate:

  1. From the Setup menu, select Taxes, Tax Rates.
  2. Click List and select the tax that is to calculate and the supplemental rate.
  3. Enter the appropriate Supplemental Rate Percent or Formula.
    Note: IRS and State regulations may have specific requirements for supplemental taxes. For more information, consult a certified tax advisor for your state.
  4. Click Save and Close.

If the employee's check includes any deductions marked as Before employee/employer taxes in the Deduction Setup window, Payroll prorates the deduction across the non-supplemental and supplemental wages. For example, an employee earns gross wages of $6000. His non-supplemental wages equal $1000, and his supplemental wages equal $5000. The employee has a 401(k) deduction of $500. The employee's supplemental and non-supplemental taxable amounts calculate as follows:

Supplemental taxable 5000 - (5000/6000*500) = 4583.33
Non-supplemental taxable 1000 - (1000/6000*500) = 916.66

Notes:

  • If an employee's individual tax record includes an Adjustment Method other than No Adjustment, No tax, or Exempt, Payroll ignores that Adjustment Method when calculating taxes for supplemental wages.
  • The Check Tax Record combines the total taxable and tax amounts for supplemental and non-supplemental wages.
  • You may receive an error in Enter Checks "Too many digits left of point" if you try to manually adjust FWH without modifying the Supplemental Rate Percent.
  • If you have both supplemental and non supplemental wages on the same check, the taxes will calculate based on the non-supplemental rate/s, and ignore the supplemental rate.

For a thorough description of the process, refer to the Payroll Help topic "About supplemental wages."




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