The Postal Service is reminding employees that the percentages used to tax supplemental wages differ from normal taxation percentages.
Supplemental wages can include:
- Annual leave exchanges
- Back-pay awards
- Severance pay
- Reimbursements for nondeductible moving expenses
Currently, supplemental wages are subject to a withholding rate of 22 percent.
There’s also a mandatory withholding rate of 37 percent — or the highest rate of income tax for the year — for any supplemental wages paid in excess of $1 million within a calendar year.
Congress and the IRS determine taxation percentages.
The Postal Bulletin’s Jan. 16 edition has more information.