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Supplemental Tax Charges By State

Typically, paying workers hourly or wage wages is an easy course of. However, what occurs whenever you pay worker commissions or bonuses? You could want to make use of a supplemental flat tax fee for federal and state revenue taxes. Not all states require supplemental tax charges. So, check out the supplemental tax charges by state to see in case your state does.

What’s supplemental tax?

Earlier than we get into the supplemental tax charges by state, let’s evaluation supplemental revenue tax. Supplemental revenue tax is assessed on supplemental wages (e.g., bonuses, commissions, and so forth.). The federal supplemental withholding tax is 22%. 

The supplemental revenue tax just isn’t along with customary revenue tax charges. As an alternative, you employ the supplemental fee instead of the usual withholding fee. 

Social Safety and Medicare tax charges don’t change on supplemental wages.

What is state supplemental tax? State supplemental tax is an income tax on supplemental wages, including commission, bonuses, back pay, etc. The tax is separate from and in place of state income tax on regular wages.

What’s state revenue tax, and the way is the supplemental revenue tax completely different?

State revenue tax is a tax on an worker’s wages. The state determines how a lot tax to withhold for revenue tax and the tactic of withholding. Some states could use a progressive methodology the place the tax will increase as wages enhance. Others select to make use of a flat tax fee the place all wages obtain the identical tax fee. 

Employers don’t use the supplemental wage tax fee for normal wages, akin to hourly or salaried work. As an alternative, employers use state supplemental tax charges when paying wages that complement an worker’s customary revenue. Examples of supplemental revenue embrace:

  • Bonuses
  • Fee pay
  • Awards
  • Prizes
  • Again pay
  • Retro pay will increase
  • Extra time pay
  • Funds for accrued sick go away 
  • Paid break day or trip payouts
  • Severance pay

Do employers have to make use of a supplemental tax fee?

State legal guidelines could differ, however employers sometimes can determine to make use of supplemental tax charges. However, there’s a catch. In some states, the usage of the supplemental tax fee can rely upon how you pay the worker’s supplemental pay. 

  1. Paying supplemental wages individually: In the event you pay your worker individually from their customary wages (e.g., a second payroll run for fee pay), use the supplemental tax fee for the fee payroll. 
  2. Paying supplemental wages with customary wages: In the event you pay an worker their supplemental and common wages collectively in the identical payroll, don’t use the supplemental tax fee. As an alternative, course of payroll as regular and use the tax tables from IRS Publication 15-T

Not all states comply with the identical guidelines concerning how one can pay supplemental wages and tax them. Test along with your state for extra info. 

Do supplemental tax charges change?

Whereas the federal supplemental tax fee has remained 22% for years, state supplemental tax charges could change every year. 

As a result of tax charges could change yearly, do not forget that the pay date determines tax legal responsibility. 

For instance, you determine to pay an worker for his or her unused trip time on the finish of the yr. However, you set the pay date for January 4. As a result of the pay date is within the following yr, you should use the brand new yr’s tax fee for the payout. And, the wages will go on the next yr’s Type W-2. 

Pay supplemental wages with ease!

  • Create cash sorts for supplemental revenue
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Supplemental tax charges by state

State supplemental tax charges rely upon a couple of components. First, solely states with revenue tax withholding use supplemental tax charges. However, not all of them use supplemental withholding charges even when they’ve state revenue tax. As an alternative, states with out supplemental revenue tax charges proceed utilizing their customary revenue tax strategies. 

States that don’t have revenue tax embrace:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas 
  • Washington
  • Wyoming

The states with revenue tax and no supplemental tax fee embrace:

  • Arizona
  • Colorado
  • Connecticut
  • Delaware
  • Hawaii
  • Illinois
  • Indiana
  • Kentucky
  • Louisiana
  • Massachusetts
  • Michigan
  • Mississippi
  • New Jersey
  • North Carolina
  • Pennsylvania
  • South Carolina
  • Utah
  • Washington, D.C.

States with supplemental revenue tax charges embrace:

  • Alabama
  • Arkansas
  • California
  • Georgia
  • Idaho
  • Iowa
  • Kansas
  • Maine
  • Maryland
  • Minnesota
  • Missouri
  • Montana 
  • Nebraska
  • New Mexico
  • New York
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Rhode Island
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin

Try this chart for supplemental tax charges by state:

State Supplemental Tax Fee
Alabama 5%
Alaska None
Arizona None
Arkansas 5.9%
California 10.23% on bonus and inventory choices, 6.6% on all else
Colorado None
Connecticut None
Delaware None
Florida None
Georgia Varies by annual wage quantity
Underneath $8,000: 2%
$8,000 – $10,000: 3%
$10,001 – $12,000: 4%
$12,001 – $15,000: 5%
Over $15,000: 5.75%
Hawaii None
Idaho 6.5%
Illinois None
Indiana None
Iowa 6%
Kansas 5%
Kentucky None
Louisiana None
Maine 5%
Maryland Use the speed on the backside of the native tax desk; 3.2% for residents of Maryland working in Delaware and different nonreciprocal states
Massachusetts None
Michigan None
Minnesota 6.25%
Mississippi None
Missouri 5.3%
Montana 6%
Nebraska 5%
Nevada None
New Hampshire None
New Jersey None
New Mexico 5.9%
New York 11.70% 
North Carolina None
North Dakota 1.84%
Ohio 3.5%
Oklahoma 4.75%
Oregon 8%
Pennsylvania None
Rhode Island 5.99%
South Carolina None
South Dakota None
Tennessee None
Texas None
Utah None
Vermont 30% of federal withholding for non-periodic funds
Virginia 5.75%
Washington None
Washington, D.C. None
West Virginia 5.75%
Wisconsin Varies by annual gross wage quantity
Underneath $12,760: 3.54%
$12,760 – $25,520: 4.65%
$25,520 – $280,950: 5.30%
Over $280,950: 7.65%
Wyoming None

Remember the fact that your locality may need a separate supplemental tax fee. For instance, New York Metropolis’s supplemental tax fee is 4.25%. Test along with your native tax authority for extra info. 

Contact your state for extra info on altering tax charges.

Instance of supplemental tax charges

You may have a enterprise in Kansas and pay an worker a bonus of $500. The bonus pay is on a separate payroll from the worker’s wages, so you should use the supplemental tax fee. 

The federal supplemental tax fee is 22%. Kansas has a state supplemental tax fee of 5%. Social Safety stays 6.2%, and Medicare remains to be 1.45%. 

Multiply the $500 bonus by 22% to find out how a lot to withhold for federal revenue tax (FIT):

$500 X 22% = $110

Then, multiply $500 by 5% to calculate the Kansas supplemental tax:

$500 X 5% = $25

Decide Social Safety tax withholding by multiplying the bonus pay by 6.2%:

$500 X 6.2% = $31

Multiply $500 by 1.45% to get Medicare withholding:

$500 X 1.45% = $7.25

Subtract the entire tax withholding quantities from the gross bonus pay quantity to find out the worker’s bonus internet pay:

Internet Pay = Gross – FIT – SIT – Social Safety – Medicare 

$326.75 = $500 – $110 – $25 – $31 – $7.25 

After calculating the supplemental pay fee, the worker’s internet pay is $326.75. 

This isn’t supposed as authorized recommendation; for extra info, please click on right here.



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