# Supplemental wage payments.
**AGENCY:**
Internal Revenue Service (IRS), Treasury.
**ACTION:**
Correcting amendment.
**SUMMARY:**
This document contains corrections to final regulations (TD 9276) that were published in the *Federal Register* on Tuesday, July 25, 2006 (71 FR 42049), amending the regulations that provide for determining the amount of income tax withholding on supplemental wages. These regulations apply to all employers and others making supplemental wage payments to employees.
**DATES:**
The correction will be effective January 1, 2007.
**FOR FURTHER INFORMATION CONTACT:**
A.G. Kelley, (202) 622-6040 (not a toll-free number).
**SUPPLEMENTARY INFORMATION:**
**Background**
The final regulations that are the subject of these corrections are under sections 3401 and 3402 of the Internal Revenue Code.
**Need for Corrections**
As published, final regulations (TD 9276) contain errors that may prove to be misleading and are in need of clarification.
**List of Subjects in 26 CFR Part 31**
Employment taxes, Income taxes, Penalties, Pensions, Railroad retirement, Reporting and recordkeeping requirements, Social security, Unemployment compensation.
**26 CFR Part 31**
**Correction of Publication**
Accordingly, 26 CFR part 31 is corrected by making the following correcting amendments:
**PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE**
*Paragraph 1.* The authority citation for part 31 continues to read, in part, as follows:
**Authority:**
26 U.S.C. 7805 * * *
**26 CFR Part 31**
*Par. 2.* Section 31.3402(g)-1(a)(8) is amended by revising the fifth sentence of *Example 1* paragraph (iii), the fifth sentence of *Example 3* paragraph (i), the last sentence of *Example 3* paragraph (iv) and the third sentence of *Example 3* paragraph (vi).
The revisions read as follows:
§ 31.3402(g)-1
(a) * * *
(8) * * *
**Example 1.**
* * *
(iii) * * * If Y elected to withhold income tax using paragraph (a)(7) of this section, Y would withhold on the $400,000 component at 25 percent (pursuant to paragraph (a)(7)(iii)(F) of this section), which would result in $100,000 tax withheld. * * *
**Example 3.**
(i) * * * Unrelated company U pays D sick pay as an agent of the employer R and such sick pay is supplemental wages pursuant to § 31.3401(a)-1(b)(8)(i)( *b* )( *2* ). * * *
(iv) * * * If R elects to use optional flat rate withholding provided under paragraph (a)(7)(iii)(f) of this section, withholding would be calculated at 25 percent of the $1,000,000 portion of the payment and would be $250,000.
(vi) * * * If U elects to withhold income tax at the flat rate provided under paragraph (a)(7)(iii)(F) of this section, withholding on the $50,000 of sick pay would be calculated at 25 percent of the $50,000 payment and would be $12,500. * * *
LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).