What Are Taxable Wages?

Taxable wages must be reflected on a federal income tax return.

Taxable wages include all income earned that is not specifically exempted from taxes by law. All taxable wages should be presented on a tax return and all taxable wages are subject to tax. Different types of income are considered taxable wages. When a person files his income tax return, all types of taxable wages must be included regardless of the source of the income. Certain types of nontaxable income are required to be included on the tax return as well even though it is not taxable. Income that is exempt from taxes is listed on the IRS Publication 525, Taxable and Nontaxable Income.

Job Earnings

The main type of wages that are taxable are income a person earns from a job. At the end of the year, employers mail a Form W-2 to all employees. This form states the employees' taxable wages and also shows all withholdings made by the employer throughout the year. Typically, all income earned at a job is taxable. This also includes any cash payments made to an employee by the employer or cash tips received.

Determining Taxable Wages

Taxable wages, paid by an employer, are calculated by beginning with the person's gross earnings. These wages refer to taxable wages regarding the payment of state, federal and local taxes. This includes any types of taxable fringe benefits and tips. A person's gross wages are determined by adding all payments made to the employee for work performed. From this amount, several types of things are deducted, including meals and Cafeteria 125 benefits. Several types of items are then added to this amount, including group-term life insurance costs and third-party sick pay.

Social Security Taxable Wages

Social Security and Medicare taxable wages vary slightly from taxable wages for federal and state purposes. The reason for this is that for Social Security tax purposes, only the first $106,800, as of 2009, are taxable. Any wages earned above this amount are not taxable.

Constructively Received Income

Income that was made available to a person before the year end is considered taxable wages. A check that was sent to a person, even if it is not cashed, is considered taxable wages unless it is exempt from taxes.

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