Accounting, Payroll & Pension Issues/payout of contract

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Question
I will need to process a payroll check today to payout the duration of a contract.  I was wondering if there is any way to alleviate the payroll taxes since it will be a fairly large lump sum payment.

Answer
Circular E says you can use one of two ways:

Either use a flat rate of 25% or

you can figure the wages as if one payment than subtract the wages withheld on the regular payroll check and withold the difference.

I usually find that the 25% is the lowest way to go on the taxes. My system only allows me to do weekly, biweekly, semimonthly or monthly. For the large checks paid out which are for a settelment such as you have I change it to monthly to see if it makes a difference. most of the time it is still more than the 25% supplemental rate.

The state has a supplemental rate to go along with the federal. You have to check with your state for the supplemental rate.

Shirley

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

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