MF Supplemental Wages-Paid Out Earned Time
UW Medical Foundation Policy Print
February 3, 2004
Supplemental Wages-Paid Out Earned Time
Supplemental Wages / Paid Out Earned Time (Lump sum pay-outs only)
This memo is in regards to the requests for paid out earned time. Per the Internal Revenue
Service Publication 15 these wages are considered supplemental. Supplemental wages are
compensation that is paid in addition to regular wages. Supplemental wages can include
”bonuses, accumulated earned time, severance pay, retroactive pay increases, prizes, awards,
commissions and nondeductible moving expenses”.
The IRS regulations are very clear and direct on the payment of paid out earned time. We will be
processing paid out earned time through the regular payroll cycles (no separate checks allowed).
The following methods can be used to calculate tax withholdings:
1. Withhold a flat 25% (no other percentage allowed) for federal and 6.75% for state.
2. Add the supplemental and regular wages for the period. Then figure the income tax
withholding as if the total was a single payment. When requesting paid out earned time
please note on the employee change form which option you would like your withholdings
If you have further questions please contact Stacy Schultz, Manager, Payroll & Physician
Compensation at 821-4174 or firstname.lastname@example.org.
Director, Decision Support, Payroll & Physician Compensation