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Payroll in Practice: 8.2.2022

Aug. 2, 2022, 8:04 PM

Question: An employer uses the aggregate method for withholding from quarterly bonus payments paid separately from regular pay. The employer discovered that, when employees elect to have additional taxes withheld from their pay, the payroll system withholds the additional amount from both regular and bonus payments. Should the additional withholding amount be withheld for each separate payment?

Answer: If there are separate payments, the additional withholding should only be withheld from one of the payments. Additional withholding is elected using Form W-4, Employee’s Withholding Certificate. The form specifies that the additional amount is to be withheld each pay period. It does not say to withhold the additional amount from each payment.

Under the aggregate supplemental pay method, all compensation paid during a single pay period should be combined (aggregated), and the withholding should be computed on the combined amount as if it were a single payment.

For example, an employee is paid a $3,000 salary each semimonthly pay period. On Friday, July 15, the employee receives a $6,000 bonus. The employee receives the $9,000 in a single check. The employee’s 2022 Form W-4 specifies married filing joint, the Step 2 check box is blank, Step 3 shows a $4,000 annual child credit, and Step 4(c) shows $200 in additional withholding per pay period.

The tax table withholding on $9,000 is $1,221, and the $200 additional withholding brings the total to $1,421 for the pay period.

Suppose the bonus was paid on July 20, and the salary paid separately on July 15, the regular pay date. The withholding on the salary, including the $200 additional withholding, is $247. Withholding on the salary without the additional withholding is $47. The employer has the option to use the regular pay from the previous pay period to compute the withholding on the bonus.

The withholding on the $9,000 combined amount is $1,421 including the additional $200. However, $247 has already been withheld from the salary payment. Subtracting $247 from $1,421 leaves $1,174 to be withheld from the bonus.

The employer could instead use the optional flat rate method to compute the withholding on the bonus. Under that method, the withholding on the salary would be $247, which includes the $200 additional withholding. The withholding on the bonus would be a flat 22% of $6,000, equaling $1,320. Total withholding for the pay period would equal $1,567 ($47 + $200 + $1,320).

If withholding were computed separately for each payment as if each was the only payment during the pay period, the withholding for the bonus would be $751, including the $200 additional withholding. The total withholding would be $998 ($47 + $200 + 551 + 200). Despite withholding twice the amount of additional withholding specified in the W-4, the amount of withholding would be less than the amount required under the supplemental pay rules.

All computations were made using the IRS 2022 Income Tax Withholding Assistant for Employers.

Question: An employer provided health insurance to the spouse of a deceased employee through COBRA. Are these payments taxable to to the spouse and could they qualify for the COBRA premium assistance tax credit if paid during the period April 1, 2021, through Sept. 30, 2021?

Answer: After termination of employment, employees and beneficiaries are provided the opportunity to continue employer heath care coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

In most cases, COBRA premiums are paid to the employer by the former employee or beneficiary with after-tax dollars. In some cases, the employer pays some or all of the premiums.

The general exclusion for employer payments for employer provided accident and health plans also excludes employer payments of COBRA premiums from employee income.

For purposes of this exclusion, a widow or widower of a deceased employee is treated as an employee. Premium assistance provided by the employer is not taxable to the surviving spouse.

However, the payments do not qualify for the COBRA premium assistance tax credit. The credit is available for payments made due to a reduction in hours or involuntary termination of employment, but the death of an employee does not qualify, according to IRS Notice 2021-31, Premium Assistance for COBRA Benefits, Q&A 33.

According to the Q&A, “The death of an employee is not a reduction in hours or an involuntary termination of employment, so a loss of coverage due to the employee’s death would not result in the spouse and dependent children of the employee being potential Assistance Eligible Individuals.”

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., or its owners.

Author Information

Patrick Haggerty is the owner of a tax practice in Chapel Hill, N.C., and an enrolled agent licensed to practice before the Internal Revenue Service. The author may be contacted at

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To contact the editor on this story: William Dunn in Washington at