Learn why you should pay commission separate from regular pay.
Do you want to create a separate commission check for an employee? While you can pay commission in regular paycheck, you might consider doing it separately. We explain why
There are a number of reasons to pay commission separate from a regular paycheck.
- You want to control the tax treatment of a commission or the withholding of retirement account deductions. For example, an employee might want a commission to be withheld at the flat 22% supplemental rate for federal income tax. It isn't possible to control the tax rate when you include the commission on a payroll check.
- You want to turn off direct deposit for the commission check.
- You're paying the commission off-cycle. Not on a regularly scheduled payday.
- The commission was earned over a different period than the current pay period.
- The employee has accumulated $1,000,000 or more in supplemental wages. This means you're required to withhold federal taxes at 37%.
Things to know
- If your state also has a supplemental tax rate, we apply the state rate when you choose to use supplemental rates. Some states don't have a supplemental tax rate. So in these states, we apply only the federal supplemental tax rate if you check that box.
- If the employee has accumulated $1,000,000 or more in supplemental wages in the current tax year, you must withhold federal income tax at 37%.
See Set up and pay a commission-only employee for details on how to set up a separate check.