Vision Payroll

December 28, 2010

2010 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation

2010 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation
2010 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation
This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 1, wages, tips, other compensation.

Box 1 May Include Several Adjustments To Gross Wages

Box 1 shows the amount employees must enter on line 7 of Form 1040, US Individual Income Tax Return. It may be, but is not necessarily, equal to gross wages. Common adjustments that increase or decrease gross wages include the following:

  • Employee elective deferral to qualified retirement plans such as §401(k) plans, SIMPLE plans, and §403(b) plans (decrease).
  • Amounts withheld for non-taxable benefits elected under §125 plans (decrease).
  • Taxable non-cash fringe benefits, such as personal use of company automobile (increase).
  • Certain clergy housing allowances (decrease).
  • Reported tips (increase).
  • Expense reimbursements paid under a non-accountable plan (increase).
  • Accident and health insurance premiums for so-called 2% S corporation shareholders (increase).
  • Cost of group-term life insurance in excess of $50,000 (increase).

Box 2, Federal Income Tax Withheld Is the Next Topic

The next topic in this continuing series will be Box 2, federal income tax withheld. Contact Vision Payroll with any questions on the 2010 Form W-2.

December 28, 2009

2009 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 1, wages, tips, other compensation.

Box 1 shows the amount employees must enter on line 7 of Form 1040, US Individual Income Tax Return. It may be, but is not necessarily, equal to gross wages. Common adjustments that increase or decrease gross wages include the following:

  • Employee elective deferral to qualified retirement plans such as §401(k) plans, SIMPLE plans, and §403(b) plans (decrease).
  • Amounts withheld for non-taxable benefits elected under §125 plans (decrease).
  • Taxable non-cash fringe benefits, such as personal use of company automobile (increase).
  • Certain clergy housing allowances (decrease).
  • Reported tips (increase).
  • Expense reimbursements paid under a non-accountable plan (increase).
  • Accident and health insurance premiums for so-called 2% S corporation shareholders (increase).
  • Cost of group-term life insurance in excess of $50,000 (increase).

The next topic in this continuing series will be Box 2, federal income tax withheld. Contact Vision Payroll with any questions on the 2009 Form W-2.

December 21, 2008

2008 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 1, wages, tips, other compensation.

Box 1 shows the amount employees must enter on line 7 of Form 1040, US Individual Income Tax Return. It may be, but is not necessarily, equal to gross wages. Common adjustments that increase or decrease gross wages include the following:

  • Employee elective deferral to qualified retirement plans such as §401(k) plans, SIMPLE plans, and §403(b) plans (decrease).
  • Amounts withheld for non-taxable benefits elected under §125 plans (decrease).
  • Taxable non-cash fringe benefits, such as personal use of company automobile (increase).
  • Certain clergy housing allowances (decrease).
  • Reported tips (increase).
  • Expense reimbursements paid under a non-accountable plan (increase).
  • Accident and health insurance premiums for so-called 2% S corporation shareholders (increase).
  • Cost of group-term life insurance in excess of $50,000 (increase).

The next topic in this continuing series will be Box 2, federal income tax withheld. Contact Vision Payroll with any questions on 2008 Form W-2.

August 8, 2008

Question of the Week: Can Sole Proprietors Pay Themselves Wages?

This week’s question comes from Jon, a sole proprietor: I run my business as a sole proprietorship. Can I pay myself wages and withhold taxes? Answer: Sole proprietors are considered self-employed and are not employees of the sole proprietorship. They cannot pay themselves wages, cannot have income tax, social security tax, or Medicare tax withheld, and cannot receive a Form W-2 from the sole proprietorship. They may receive a draw from the sole proprietorship and must pay quarterly federal estimated tax payments to cover the amount of federal income tax and self-employment tax liability they will have, unless covered by withholding on other income. Vision Payroll can work with you and your CPA to determine an appropriate draw and estimated tax payment schedule. You can then receive the draw as a check or direct deposit with each payroll and schedule appropriate deductions such as retirement plan contributions. Contact Vision Payroll today to get started.

August 3, 2008

IRS Issues Guidance on Payments to Deceased Employees

Filed under: News — Tags: , , , , , , , , , — Vision @ 10:55 am

The IRS recently issued guidance for reporting wages paid in 2008 (including accrued wages and vacation pay) on behalf of deceased employees. Although state law generally controls who receives the unpaid wages, the reporting follows the same rules even if the check is reissued in the name of the employee’s estate or beneficiary. If the employee died in 2008, the employer withholds social security and Medicare taxes and reports the payments in boxes 3 and 5 of the 2008 Form W-2. The wages are not to be reported in box 1 of the 2008 Form W-2 and no income tax is to be withheld. Instead, the amount of the payment must be reported in box 3 of the 2008 Form 1099-MISC using the name and taxpayer identification number of the recipient of the payment. If the employee died in 2007 or before, there is no reporting on the 2008 Form W-2 and no withholding of social security and Medicare taxes. The payment must still be reported in box 3 of the 2008 Form 1099-MISC using the name and taxpayer identification number of the recipient of the payment. Contact Vision Payroll to ensure proper reporting for payments of wages made on behalf of your deceased employees.

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