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Supplemental Wages

The term in the Internal Revenue Code for compensation received in addition to regular wages. It includes compensation from exercises of NQSOs and SARs and from restricted stock vesting (not ISO exercises or ESPP purchases), along with bonuses, commissions, overtime pay, and severance pay. For your federal taxes, your company applies a flat 25% withholding rate (39.6% for amounts of aggregate supplemental income above $1 million in a calendar year). Supplemental income is also subject to Social Security, Medicare, and FUTA taxes. Each state (cities and counties too) have different rules on what type of income is considered supplemental wages and what tax rate, if any, applies.

This website tends to use the phrase "supplemental income" (rather than "wages"), so if you seek for related content in our search engine, enter that phrase instead.

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