Yes, you would include the commissions with their regular wages on the W-2.
Yes, you would take federal and state withholding, as well as social security and medicare tax from the gross commissions they are paid. You should use their W-4 and possibly specific rules for certain types of pay.
- How you withhold on supplemental wages (includes commissions) depends on whether the supplemental payment is identified as a separate payment from regular wages. The Internal Revenue Bulletin (IRB) below will explain the necessary withholding on commissions. Use Ctrl + F to search for 'supplemental wages'. They provide various examples so you can see which one fits your situation.
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