Taking the temperature of sick pay payouts
Question: Every December, the company pays out employees’ unused sick leave in separate checks. We’ve always taxed these payments as supplemental wages, but employees are questioning the 25% withholding rate. If we choose to combine these payments with employees’ regular pay, can we withhold as if the payment was a single wage payment?
Answer: Yes. How you withhold on supplemental pay is entirely up to you. You may combine the supplemental payment with employees’ regular wages and withhold taxes on the total. This is called the aggregate method of withholding. Be careful what you wish for: Employees may still be under- or overwithheld if you use the aggregate method.
Can we make up an SSN if we don’t have one?
Question: Our company has an intern from Europe who will be working for a short period of time. She couldn’t get a Social Security number because her visa will expire before the Social Security Administration can issue a number. HR says that we can just put 123-45-6789 as her SSN on her W-2. That doesn’t sound right to us. How do we report this on her W-2?
Answer: HR is incorrect. You should put all zeros in Box a of this employee’s W-2. Since the employee won’t get an SSN before returning to Europe, cover yourself by soliciting her SSN (even if it’s not available) by asking her to complete a new W-4.