With the end of financial year approaching, many organizations around the globe would be thinking of awarding their hard-working employees with better remuneration. For many of these organizations, taking in parameters of employee performance and experience and calculating the amount of bonus to be circulated can be mind boggling. Creating each separate check and putting signature onto is will cost a lot of time and effort. With QuickBooks this problem can easily be solved.
With QuickBooks Payroll, you can either create a complete paycheck that contains the salary as well as bonus or create separate checks for bonuses. Bonuses are also subject to taxes. This is why we must consider the various tax imposed on paying employees to be applicable on bonuses as well. These taxes are applicable on bonus payment despite the payment mode. You may choose to pay through bank account, credit card or paychecks.
With QuickBooks Payroll, the stored data can be used to calculate taxes. Though most of these taxes are normal and QB cannot calculate supplemental rate applicable on Federal taxes and state taxes that are also to be paid on bonuses.
What are supplemental wages?
Any wage that is given in addition to the normal wage of the employee is deemed as supplemental wage. These can include the tips, commissions, overtime payments, bonuses, etc. These wages are not subjected to the same tax laws that regular wages are subjected to. Further, there is no necessity to pay taxes on supplemental wages and regular wages at the same time. A seven day period is given for tax payment on regular wages but the same isn’t true for taxes on supplemental wages.
There are a number of factors this percentage depends upon.
● Supplemental Wages less than 1 million USD: A flat rate on 25 % can be held on both the wages combined. You can also choose to pay the tax separately. This way you can pay later but the percentage of tax cut may differ from the fixed rate. These rates are implemented by IRS. Also, many complicated calculations are involved in separately calculating the tax on these individual wages.
● Supplemental Wages more than 1 million USD: On combined wages there can be a combined rate of 25 % but on supplemental wages more than 1 million USD tax has to be calculated separately. This tax is to be paid at 35% on the amount exceeding 1 million USD. This way, a huge amount is saved from being taxed at a high rate, only the amount that supersedes 1 million USD is taxed.
There are taxes on the other forms of payments of supplemental wages. Tips are taxed along with trips commissioned by organizations and overpay is also subject to these taxes.
To stay on top of these taxes is an arduous task. Most people hate gutting out their pockets at tax time but it is important to pay taxes and not only to avoid hefty penalties. With QuickBooks Payroll support this process simplifies substantially. To know more, contact us at 1844.827.3817 (Toll Free.)