This question is about salaries.

How is commission taxed?

By Zippia Team - Oct. 25, 2022

The commission is taxed differently than regular wages and this depends on how they are paid out by the employer to the employee. Commissions are considered to be supplemental wages by the Internal Revenue Service (IRS).

Supplemental wages, as defined by the IRS, are wages an employee makes outside of their regular wages or salary. The taxes on commissions are based on how an employer pays an employee.

For example, if an employee's commission is included in their regular pay, then it is taxed according to normal federal and state withholdings. However, if an employee's commission is outside of their regular paycheck, it then becomes a form of supplemental pay and is taxed at a rate of 25%.

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