Several of the alternative tax calculation methods just described are used because the amount withheld from employee pay for the year-to-date is higher than will be needed by the end of the calendar year. This may be caused by a large payment to an employee earlier in the year, perhaps a commission or bonus; when this happens, the extra payment is typically lumped into the person's regular pay, which bumps the person into a higher tax bracket on the assumption that he or she always receives this amount of money during every pay period. As a result, there will be an excessively large withholding at the end of the year, and the employee will receive a tax refund.

One approach for avoiding the excessive amount of tax withholdings is to separate the supplemental pay from the base pay and issue two separate payments to an employee. Under this approach, the percentage withheld will likely be smaller than if the pay had been combined into a single paycheck. Another approach that is acceptable to the IRS is to combine the payments and then withhold a flat 27 percent rate from it. For most computerized payroll systems, it is easier to implement the first approach.