What does IRS mean by exclusion from gross wages and exempt from tax in Pub 15 and 15b.
Do they mean the same thing? Which exempt from tax also means exclusion from gross wages?
For federal purposes only, we have three different taxable wage definitions. FIT, FICA, FUTA. Plus whatever your state(s) use. Gross wages is interesting for proofing purposes but not otherwise used for much of anything.
Got it. Thanks David!
I did not want to confuse the first answer but gross wages is one of those things which people disagree on. For example, does it include GTL and other imputed wages? Since there is a risk of entering the accounting equivalent of "how angels can dance on the head of a pin" argument, I stay with what the law actually talks about (FIT, FICA, FUTA) and stay away from theological disputes.
I use gross wages to proof payroll. Period. Federal tax law does not define it and I have enough problems with real issues without making up fake ones. If you leave off imputed wages, gross wages is very useful for proofing purposes, like comparing two different payrolls for differences. But if we are talking about anything but proofing payrolls, use the correct wage definition for the specific tax in question since that is the only thing the government(s) care about.
Agree with David -- gross wages and "compensation" are very often defined very differently depending on the benefit/Taxing issue. Different definitions will include differing exclusions of what is or is not included in it.
If I can hi-jack this thread for a minute, getting all your proofing done on a payroll-by-payroll basis. Do not wait until year end to discover you have a problem. Compare each payroll with your last payroll. Compare the current payroll with the budgets. If you have a report writer, use it for proofing. Everything which has ever been a problem should be proofed in real time. Take several payments at random and run them through a payroll calculator. Do not assume because a "computer did it", then it must be right.
I went to work for a Fortune 500 company you have all heard of. We had three different codes for "other income", none of which had the same tax grid, and no one could tell me what each was used for. They just picked one of the codes at random. The time accounting system used a different week definition for overtime purposes, then what HR had posted on the wall. We were routinely reissuing over half of the W2s because of errors (and the other half were wrong, just no one was catching it). I had to completely reinstall the payroll system from scratch at year end because that was the only way I could be sure I understood what it was doing.
Never assume that the person who had your job before had a clue what they were doing.
Just found out the last HR person at my current Interim HR Manager position gave the 401k TPA the wrong compensation for 2016....ugh! I've only been here 6 days and have found all sorts of issues with the prior HR person. (But I'm not directly responsible for payroll anymore YAY!!!)