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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18936
Experience:  15years with H & R Block. Divisional leader, Instructor
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I was wondering about base salary and commission: My company

Customer Question

I was wondering about base salary and commission: My company just told me that they just found out that commission was supposed to be taxed as if it was supplemental income - which is fine - but why are they now figuring this out when it is a HUGE company and have many sales managers all on salary with commission - they said they will now deduct 25% out of the commission - looking back there was never a set amount it fluctuated between 8 - 18%
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: no just a quick answer to that.
Submitted: 12 months ago.
Category: Tax
Expert:  Robin D. replied 12 months ago.

Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

Expert:  Robin D. replied 12 months ago.

Commissions are considered Supplemental wages and the IRS decides the rate. Why the large company has not been following the rule is not known but if the supplemental wages do not exceed one million dollars, employers can choose to combine and tax all the wages or they can use the flat 25% rate. But if the supplemental wages do exceed one million dollars, the employer must withhold a 35% tax on the excess amount after one million dollars.

Some states though require the wages and supplements be split out. This gives the employer no choice except to tax at 25%.

Please let me know if you need more information.
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