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How does an agency calculate the amount of employment tax withholding due on supplemental wages under the flat rate method?

The correct amount of income tax withholding is calculated by taking a flat 25 percent of the supplemental wages. Social security tax and Medicare tax withholding are calculated at the usual rates and are in addition to the 25 percent income tax withholding.

This answer was provided by the Internal Revenue Service (IRS). For further guidance/clarification on this issue, agency representatives may contact IRS (Federal, State and Local Governments) at (202) 283-9665.

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