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What Are Wages?


Wages are remuneration for services performed by an employee for an employer. Any payments that constitute remuneration for services will be subject to withholding. Payments that do not constitute remuneration for services will not be subject to withholding.  Whether the payment is via check, direct deposit, paycard or cash is irrelevant.

Much of this information comes from IRS Publication 525.

Specific remuneration categories and the related general withholding rules are noted below. State laws tend to follow the federal but state agencies should be contacted for definitive rulings.

 

                                       FIT     FICA    FUTA
Advanced earned income credit          No      No      No
Advances of pay                        Yes     Yes     Yes
Advances for ordinary business         No      No      No
expenses
Awards and prizes                      Yes     Yes     Yes
Awards of back pay                     Yes     Yes     Yes
Bonuses                                Yes     Yes     Yes
Business expense reimbursements under  No      No      No
accountable plan
Cafeteria plan cash benefits           Yes     Yes     Yes
Cafeteria plan qualified benefits      No      No      No
Commissions                            Yes     Yes     Yes
Contributions (employee) to benefit    Yes     Yes     Yes
plans
Contributions (employer) to benefit    No      No      No
plans
Contributions (employee) to profit     Yes     Yes     Yes
sharing plans
Contributions (employer) to profit     No      No      No
sharing plans
Contributions (employee) to 401(k)     No      Yes     Yes
plans
Contributions (employer) to 401(k)     No      Yes     Yes
plans
Death benefits                         No      No      No
Dependent care assistance (up to       No      No      No
$5,000 pursuant to qualified plan)
Director (non-employee) fees           No      No      No
Disability pay                         Yes     Yes     Yes
Dividends in lieu of compensation to   Yes     Yes     Yes
small business shareholders
Educational assistance, job related    No      No      No
Educational assistance, non job        Yes     Yes     Yes
related
Employee discounts                     No      No      No
Equipment, tool, and uniform           No      No      No
allowances
Flexible spending accounts             No      No      No
Fringe benefits unless excluded by     Yes     Yes     Yes
Code
Golden parachute payments              Yes     Yes     No
Group legal services                   Yes     Yes     Yes
Group medical insurance premiums       No      No      No
Group term life insurance (up to       No      No      No
$50,000) premiums
Guaranteed wage payments               Yes     Yes     Yes
Idle time payments                     Yes     Yes     Yes
Issuance of nonqualified stock options Yes     Yes     Yes
Issuance of qualified stock options    No      No      No
Jury duty pay                          Yes     Yes     Yes
Loans with obligation to repay         No      No      No
Lock out benefits                      No      No      No
Meals and lodging for convenience of   No      No      No
employer
Military leave pay                     Yes     Yes     Yes
Moving expense (goods and travel)      No      No      No
reimbursements
Partners' drawings and salaries        No      No      No
Payroll deductions                     Yes     Yes     Yes
Personal use of employer aircraft      Yes     Yes     Yes
Personal use of employer automobile    Yes     Yes     Yes
(unless de minimis fringe benefit,
working condition fringe benefit, or
qualified non-personal vehicle)
Probationary pay                       Yes     Yes     Yes
Property and non-cash payments         Yes     Yes     Yes
Retiree consulting fees                No      No      No
Retirement plan distributions          Yes     No      No
Retroactive wage increases             Yes     Yes     Yes
Royalties not tied to employment       No      No      No
contract
Salaries                               Yes     Yes     Yes
Scholarships and fellowships           No      No      No
Severance pay                          Yes     Yes     Yes
Sick pay                               Yes     Yes     Yes
Stock bonus plan distributions         Yes     No      No
Strike benefits                        No      No      No
Supplemental unemployment benefits     Yes     No      No
linked to state plan and in lump sum
Taxes of employee paid by employer     Yes     Yes     Yes
Tips                                   Yes     Yes     Yes
Travel expense reimbursements under    No      No      No
accountable plan
Use of employer athletic facilities    No      No      No
Use of employer eating facilities      No      No      No
Use of parking facilities (up to $165  No      No      No
per month)
Vacation pay                           Yes     Yes     Yes
Wages of deceased employee             No      Yes     Yes
Workers' compensation benefits and     No      No      No
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Helpful Hint... Anytime you move or have a major life change (for example - marriage, divorce, birth of a child, etc.) always be sure to complete a new W-4!