Employers are required to withhold federal tax from supplemental wages paid to employees. These include bonuses, commissions, reimbursements (so long as you don’t have an accountable plan), severance, cash prizes, retroactive raises, and taxable fringe benefits.
Suppose you pay a bonus separately from regular wages. In that case, you generally must either 1) withhold 22% or 2) add the supplemental wage to the employee’s regular wages and withhold at the ordinary rate. Supplemental wages paid with regular wages are subject to ordinary withholding. (For supplemental wage payments over $1 million, tax on the excess must be withheld at the highest rate, currently 37%.)