Wage and other compensations Flashcards
Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes.
Your employees must meet all three of the following rules.
- They must have paid or incurred deductible expenses while performing services as your employees. The reimbursement or advance must be paid for the expense and must not be an amount that would have otherwise been paid by the employee.
- They must substantiate these expenses to you within a reasonable period of time.
- They must return any amounts in excess of substantiated expenses within a reasonable period of time.
What is a Nonaccountable plan?
Your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation,
You advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount he or she does not use for business expenses,
You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or
You pay an amount as a reimbursement you would have otherwise paid as wages.
How do you treat Nonaccountable plan?
They are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes.
Standard mileage rate for 2014
The rate for 2014 is 56 cents per mile.
Are the value of meals and lodgings a taxable income?
The value of meals and lodging are not taxable income and are not subject to income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer’s convenience and on the employer’s premises
What is the 50% test on meals?
If over 50% of the employees who are provided meals on an employer’s business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer.
Payments that are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding.
Health insurance plans
Medical care reimbursements
Health Savings Accounts and medical savings account
-if it is reasonable to believe at the time of payment of the contributions they will be excludable from the income of the employee
-Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to taxes.
Examples of nontaxable fringe benefits
Services provided to your employees at no additional cost to you.
Qualified employee discounts.
Working condition fringes that employee could deduct as a business expense if he or she had paid for it. Examples include a company car for business use and subscriptions to business magazines.
Certain minimal value fringe such as cab ride
Qualified transportation fringes
Qualified moving expense reimbursement.
Do you withhold employment taxes for the fringe benefits?
You generally must include fringe benefits in an employee’s gross income.
Do you withhold employment taxes for the sick pay?
Sick pays are subject to social security, Medicare, and FUTA taxes. Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. The payments are always subject to federal income tax.
What ee must do to report tips?
Your employee must report cash tips to you by the 10th of the month after the month the tips are received.
No report is required for months when tips are less than $20
Your employee reports the tips on Form 4070
Er. collects taxes on tips by deducting ee wages,
If there are not enough funds available, withhold taxes in the following order.
- Withhold on regular wages and other compensation.
- Withhold social security and Medicare taxes on tips.
- Withhold income tax on tips.
What is supplemental wages?
Supplemental wages are wage payments to an employee that are not regular wages. bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses.
