Wages Compensation

Wages & Compensation ## What Is Included in Gross Income from Employment Under IRC §61, wages and compensation are broadly includable in gross income. This includes: | Item | Taxable? | |---|---| | Wages and salaries | Yes | | Tips received | Yes | | Bonuses and awards | Yes | | Severance pay | Yes | | Back pay and damages for lost wages | Yes | | Vacation pay paid out | Yes | | Sick pay (employer-funded) | Yes | | Director's fees | Yes | | Commissions | Yes | All amounts must be reported on Form W-2 or as self-employment income. --- ## Fringe Benefits — Taxable vs. Excluded ### Excluded (Non-Taxable) Fringe Benefits The following employer-provided benefits are excluded from gross income when requirements are met: | Benefit | Key Rule | |---|---| | Health insurance premiums | Excluded; employer pays pretax | | Group-term life insurance | Excluded up to $50,000 of coverage | | Qualified transportation benefits | Up to $315/month (2024) for transit/parking | | Employee discounts | Excluded if ≤ gross profit % for goods, ≤20% for services | | Working condition fringe | Excluded if employee could deduct as business expense | | No-additional-cost services | Excluded if no substantial cost to employer (e.g., airline seats) | | Qualified tuition reduction | Excluded for employees of educational institutions | | Dependent care assistance | Excluded up to $5,000/year ($2,500 MFS) | ### Taxable Fringe Benefits - Personal use of company vehicle (value must be included in W-2) - Gym memberships for off-site facilities - Group-term life insurance over $50,000 coverage (imputed income) - Cash and cash equivalents…