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  1. #1
    wayneallenfunk is offline Junior Member
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    May 2005
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    6

    Final Vacation Payout Supplemental Taxed?

    What is the name of your state?NC

    I was terminated on 4/27 and my vacation payout was deposited into my account last night. The amount was a lot less than I thought it should have been. When I contacted the payroll department they informed me that vacation payouts are subject to the federal supplemental tax of 25%. When all other vacation time is used it was taxed like regular pay. Can they tax it this way? Any thoughts?
  2. #2
    pattytx is offline Senior Member
    Join Date
    Oct 2004
    Location
    small town, PA
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    Yes they can. Vacation pay at termination is considered supplemental wages by the IRS, and using the 25% rate is one of the options the employer may use.
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    You have not won the law suit lottery; in fact, you haven't even won the law suit scratch-off.
  3. #3
    wayneallenfunk is offline Junior Member
    Join Date
    May 2005
    Posts
    6

    Supplemental tax

    nc
    Someone I know today also received there vacation payout from the same company and it was not treated with the supplement tax. Although the payout on it was very small can they actually treat them differently, one that gets supplemental tax and one with no supplement tax?
  4. #4
    pattytx is offline Senior Member
    Join Date
    Oct 2004
    Location
    small town, PA
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    9,442
    Yes, they can. Maybe the other person asked for it that way and the company accommodated them. Maybe the company has a set amount under which they tax per the W-4 and over which they withhold at the supplemental rate. There is no legal requirement for them to treat each payment and each employee the same way, as long as they use an IRS-allowed method.
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    You have not won the law suit lottery; in fact, you haven't even won the law suit scratch-off.

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