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<blockquote data-quote="Kae3106" data-source="post: 706727" data-attributes="member: 27557"><p>You did take that out of context. All green checks issued for a shortage of the employee's regular pay will be taxed at the employee's normal rate. Actually, they tend to be taxed a little lower. Ex: the taxes on a check for $100 will be a lower percentage than the taxes on a $900 check. The system does not recognize that the green check is really a missing piece of the larger, previously issued check and calculate what the taxes should have been if it had been paid properly. It just sees it as a $100 check and taxes according to the gross amount of the check.</p><p></p><p>Why does payroll tax anything at a higher rate? IRS guidelines for supplemental pay. (Not payroll or UPS's rule.....the government's rule) If you sell back a week of vacation instead of taking it as a vacation week away from work or get paid off for accumulated sick pay, it is considered supplemental pay under the IRS rules and subject to supplemental withholding rates. <a href="http://www.irs.gov/publications/p15/ar02.html#en_US_publink1000202352" target="_blank">http://www.irs.gov/publications/p15/ar02.html#en_US_publink1000202352</a> The exact language can be found in IRS Circular E, section 7 if the link doesn't come through. Basically, if you take paid time off, it is taxed normally. If you take the cash and not the time off, it is taxed as supplemental because you got your regular check for that week PLUS the amount you sold back. However, it is all listed as wages on your W2 so you end up getting it back at tax time if the supplemental rate is higher than your nominal tax rate. This is why it is important for the operators who put in the vacation requests to understand the difference between requesting a vacation check and a vacation payoff.</p></blockquote><p></p>
[QUOTE="Kae3106, post: 706727, member: 27557"] You did take that out of context. All green checks issued for a shortage of the employee's regular pay will be taxed at the employee's normal rate. Actually, they tend to be taxed a little lower. Ex: the taxes on a check for $100 will be a lower percentage than the taxes on a $900 check. The system does not recognize that the green check is really a missing piece of the larger, previously issued check and calculate what the taxes should have been if it had been paid properly. It just sees it as a $100 check and taxes according to the gross amount of the check. Why does payroll tax anything at a higher rate? IRS guidelines for supplemental pay. (Not payroll or UPS's rule.....the government's rule) If you sell back a week of vacation instead of taking it as a vacation week away from work or get paid off for accumulated sick pay, it is considered supplemental pay under the IRS rules and subject to supplemental withholding rates. [url]http://www.irs.gov/publications/p15/ar02.html#en_US_publink1000202352[/url] The exact language can be found in IRS Circular E, section 7 if the link doesn't come through. Basically, if you take paid time off, it is taxed normally. If you take the cash and not the time off, it is taxed as supplemental because you got your regular check for that week PLUS the amount you sold back. However, it is all listed as wages on your W2 so you end up getting it back at tax time if the supplemental rate is higher than your nominal tax rate. This is why it is important for the operators who put in the vacation requests to understand the difference between requesting a vacation check and a vacation payoff. [/QUOTE]
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