When paying supplemental wages along with regular wages WITHOUT specifying the amount of each, how would withholding be determined if the employee has not been paid any supplemental wages earlier this year and the supplemental wage payment is no more than $1,000,000?

• A. Withhold a flat 25% from the supplemental wages and withhold from regular wages using the appropriate table
• B. Withhold a flat 25% from the supplemental wages
• C. Withhold income tax as if the total were a single wage payment for regular payroll period
• D. Compute income tax withholding on the regular wages separate from the supplemental wages

Answer: (C)

When supplemental wages are paid at the same time as regular wages in the same payroll period, and the employee has not received any supplemental wages earlier in the year, you use the aggregate method: you treat the total payment as one amount for that payroll period and withhold as if it were a single wage payment. This means adding the supplemental amount to the regular wages for that period and applying the regular payroll-period tax tables to the combined total. The result reflects the tax withholding consistent with the employee’s overall earnings for that paycheck.

This approach is favored here because there were no prior supplemental payments this year, and the total supplemental amount falls within the threshold that allows the aggregate method. Using a flat rate on the supplemental portion or withholding the taxes separately from the regular wages would not align with how the withholding tables are applied for a single combined payment in this scenario.