Overlapping pay periods, and payment by agent or fiduciary

# A.

Supplemental wage payments.

# 1.

An employee's remuneration may consist of wages paid for a payroll period and supplemental wages, such as bonuses, commissions, and overtime pay, paid for the same or a different period, or without regard to a particular period. When such supplemental wages are paid (whether or not at the same time as the regular wages), the amount of the tax required to be withheld under these regulations shall be determined in accordance with this section.

# 2.

The supplemental wages, if paid concurrently with wages for a payroll period, shall be aggregated with the wages paid for such payroll period. If not paid concurrently, the supplemental wages shall be aggregated with the wages paid or to be paid within the same calendar year for the last preceding payroll period or for the current payroll period. The amount of tax to be withheld shall be determined as if the aggregate of the supplemental wages and the regular wages constituted a single wage payment for the regular payroll period.

Example 1: A is employed as a salesman at a monthly salary of $130 plus commissions on sales made during the month. He claims one withholding exemption. During May 1982, A earns $300 in commissions, which together with the salary of $130 is paid on June 10, 1982. Under the wage bracket method the amount of the tax required to be withheld is shown in the table applicable to a monthly payroll period. Under this table $7.42 in tax is required to be withheld from wages of $430 with one personal exemption claimed.

Example 2: B is employed at an annual salary of $12,000 which is paid semimonthly in the amount of $500 on the 15th day and on the last day of each month. He also receives a bonus and commission determined at the end of each 3-month period. The bonus and commission for the 3-month period ending on September 30, 1982, amount to $250, which is paid on October 10, 1982. B has claimed four withholding exemptions. Under the wage bracket method, the amount of tax required to be withheld on $750, which is the aggregate of the $250 bonus and the last preceding semimonthly wage payment of $500 (which was paid September 30, 1982), is shown in the table applicable to a semimonthly payroll period to be $27.29. However, since tax in the amount of $13.60 was withheld on the (September 30, 1982) semimonthly wage payment of $500, the amount to be withheld on October 10, 1982, is $13.69 ($27.29 less $13.60).

If, however, supplemental wages are paid and tax has been withheld from the employee's regular wages, the employer may determine the tax to be withheld by using a flat percentage rate of 5.75%, without allowance for exemption and without reference to any regular payment of wages.

# B.

Vacation allowances. Amounts of so-called "vacation allowances" shall be subject to withholding as though they were regular wage payments made for the period covered by the vacation. If the vacation allowance is paid in addition to the regular wage payment for such period, the rules applicable with respect to supplemental wage payments shall apply to such vacation allowance.

# C.

Payroll period of more than one year. If wages are paid to an employee for a payroll period of more than one year, for the purpose of determining the amount of tax required to be deducted and withheld in respect of such wages the amount of the tax shall be determined as if such payroll period constituted a miscellaneous payroll period of 365 days.

# D.

Payment by agent or fiduciary. If a payment of wages is made to an employee by an employer through an agent, fiduciary, or other person who also has the control, receipt, custody, or disposal of, or pays the wages payable by another employer to such employee, the amount of the tax required to be withheld on each wage payment made through such agent, fiduciary, or person shall, whether the wages are paid separately on behalf of each employer or paid in a lump sum on behalf of all such employers, be determined upon the aggregate amount of such wage payment or payments in the same manner as if such aggregate amount had been paid by one employer. Hence, the tax shall be determined upon the aggregate amount of the wage payment. In any such case, each employer shall be liable for the return and payment of a pro rata portion of the tax so determined, such portion to be determined in the ratio which the amount contributed by the particular employer bears to the aggregate of such wages.

Example: Three companies maintain a central management agency which carries on the administrative work of the several companies. The central agency organization consists of a staff of clerks, bookkeepers, stenographers, etc., who are the common employees of the three companies. The expenses of the central agency, including wages paid to the foregoing employees, are borne by the several companies in certain agreed proportions. Company X pays 45%, Company Y pays 35% and Company Z pays 20% of such expenses. The amount of the tax required to be withheld on the wages paid to persons employed in the central agency should be determined in accordance with the provisions of this section. In such event, Company X is liable as an employer for the return and payment of 45% of the tax required to be withheld, Company Y is liable for the return and payment of 35% of the tax and Company Z is liable for the return and payment of 20% of the tax.