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Salaries & Wages


Gross Income includes many forms of compensation for services.

  • Money

    All money received, credited, or available

  • Property

    The Fair Market Value (FMV) of all property is included as gross income.

  • Cancellation of Debt

    All debts cancelled are included in gross income (except for certain cancellations of mortgage debt on principal residences, having specific guidelines for excluded amounts and debts cancelled when insolvency exists).

  • Bargain Purchases

    If an employer sells property to the employee for less than its fair market value, the difference is income to the employee.

  • Guaranteed Payments to a Partner

    Guaranteed payments are reasonable compensation paid to a partner for services rendered (or use of capital) without regard to the partner’s ration of income. This earned compensation is also subject to self-employment tax.

  • Taxable Fringe Benefits

    The fair market value of a fringe benefit is not specifically excluded by law is included in income. For e.g. an employee’s personal use of a company car is included as wages in employee’s income. The amount would also be subject to employment taxes and withholding.

  • Partially Taxable Fringe Benefits

    Premiums paid by an employer on a group-term life insurance policy covering the employees are not income to the employees up to the cost on the first $50,000 of coverage per employee. Above that is normally taxable to the recipient and included on the W-2.

  • Non Taxable Fringe Benefits

    • Life Insurance Proceeds

      The proceeds of a life insurance policy paid because of the death of the insured are generally excluded from the gross income of the beneficiary. These include accelerated death benefits received by the terminally ill.

    • Accident, Medical, and Health Insurance

      Premium payments are excluded from the employee’s income when the employer paid the insurance premiums, but the amounts paid to the employee under the policy are included in income unless such amounts are:

      • Reimbursement for medical expenses actually incurred by the employee.
      • Compensation for the permanent loss or loss of use of a member or function of the body.

    • De Minimis Fringe Benefits

      De Minimis fringe benefits are so minimal that they are impractical to account for and may be excluded from the income. For e.g. employee’s personal use of a company’s computer.

    • Meals and Lodging

      Gross income of an employee does not include the value of meals or lodging furnished to him/her by the employer for convenience of the employer on the employer’ premises. Additionally, in order to non taxable lodging must be required as a condition of the employment.

    • Employer Payment of Employee’s Education Expenses

      Up to a certain amount ($5,250) may be excluded from gross income of payments made by the employer on behalf of an employee’s educational expenses. The exclusion applies to both the undergraduate and graduate level education.

    • Qualified Tuition Reductions

      Employees of educational institutions studying at the undergraduate level who receive tuition reductions may exclude tuition reduction from income. Graduate students may exclude tuition only if they are engaged in teaching or research activities and only if the tuition reduction is in addition to the pay for teaching or research. To be excludable, tuition reductions must be offered on a non-discriminatory basis.

    • Qualified Employee Discounts

      Employee Discounts on employer-provided merchandise and service are excludable.


Forms

W-2

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