What counts as supplemental wages
IRS Publication 15 describes supplemental wages as wage payments that are not regular wages. Examples include bonuses, commissions, severance, awards, back pay, certain overtime, and some taxable fringe benefits. The payroll method depends in part on whether the supplemental amount is identified separately from regular wages.
The optional flat 22% method
When the IRS conditions are met and separately identified supplemental wages do not exceed the special threshold, an employer may use the optional flat 22% federal income-tax withholding method. A $2,000 separately identified bonus using that method would have $440 of federal income tax withheld before considering Social Security, Medicare, and applicable state/local taxes.
The 22% rate is a withholding method. It is not a statement that the bonus is ultimately taxed at a special 22% income-tax rate on the employee's return.
The aggregate method can produce a different number
An employer may instead combine or aggregate supplemental wages with regular wages under the applicable IRS rules and calculate withholding on the combined amount. The incremental withholding attributable to the bonus can therefore be higher or lower than 22%, depending on regular wages, pay frequency, W-4 elections, and the method the employer uses.
If a bonus is paid together with regular wages and the amounts are not separately identified, federal withholding is generally figured as if the combined total were one regular wage payment for the payroll period.
The $1 million rule
Special rules apply to supplemental wages above $1 million paid to an employee during a calendar year. Publication 15 requires the excess over the threshold to use the mandatory highest-rate method described for the year; for 2026 the publication states 37% on the excess. Employers under common control may have aggregation rules that matter for this threshold.
Other taxes still apply
Regardless of the federal income-tax withholding method, supplemental wages can remain subject to Social Security, Medicare, and applicable state or local payroll taxes. This is why “22% bonus tax” is an incomplete description of a paycheck: 22% may describe only one federal withholding component.
Official references
These sources are provided so you can verify the rules or concepts summarized above. PayCalc uses primary government sources where they are available.