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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