2003 Tax Help Archives  

Keyword: Wages

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

4.3 Interest/Dividends/Other Types of Income: 1099–MISC, Independent Contractors, and Self-employed

I received a Form 1099-MISC for an employee bonus. How do I report it?

Employee bonuses should be reported on Form W-2, not on Form 1099-MISC. Contact your employer and ask them to issue the correct form. If they will not issue you a Form W-2 for the bonus, complete Form 4852 (PDF), Substitute for Form W-2, Wage and Tax Statement. The bonus amount is reported on Line 7 on your Form 1040 or 1040A or line 1 of Form 1040EZ (PDF).


I received a Form 1099-MISC from a company that paid all employees this way. Will my income go on line 21 of Form 1040 as Other Income or on Schedule C?

Since your income was reported to you on a Form 1099-MISC, box 7, the company has treated you as an independent contractor and your income is treated as self-employment income. You will need to report that income, and any related expenses, on Form 1040, Schedule C (PDF), Profit or Loss from Business, or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You will also need to use Form 1040, Schedule SE (PDF), Self-Employment Tax, to compute and report your Social Security and Medicare tax, if you had net earnings from self-employment of $400 or more. You may also need to make quarterly estimated tax payments. You would use Form 1040ES (PDF), Estimated Tax for Individuals, for this.

If you feel that you were an employee and not self-employed, you can file Form SS-8 (PDF), Determination of Worker Status for Purposes of Federal Employment Taxes. This will enable the IRS to make a determination as to whether you are an employee or an independent contractor. To do this the IRS will need information from you and your employer.

For information about determining whether you are an employee or an independent contractor, please see Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide.


4.6 Interest/Dividends/Other Types of Income: Employee Reimbursements, Form W–2, Wage Inquiries

Is tuition reimbursement for school a form of taxable income or not?

If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits each year. This means your employer should not include the benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2. You do not have to include the benefits on your income tax return. The exclusion also applies to educational assistance for graduate level courses.

To qualify as an educational assistance program, the plan must be written and must meet certain other requirements. Your employer can tell you whether there is a qualified program where you work.

Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment. The payments do not have to be for work-related courses. Educational assistance benefits do not include payments for the following items:

(1) Meals, lodging, transportation, or tools or supplies (other than textbooks) that you can keep after completing the course of instruction.

(2) Education involving sports, games, or hobbies unless the education has a reasonable relationship to the business of your employer, or is required as part of a degree program.


For further information, please see, Publication 508, Tax Benefits for Work Related Education .

Tax Topic 513 Tax Topic 513, Education Expenses


My employer is including amounts paid graduate school related expenses on my Form W-2. Where do I claim education expenses on my Form 1040?

The law changed in 2002 to allow up to $5,250 in graduate school related expenses paid by educational assistance program to be excluded from gross income. If your employer has included amounts paid for graduate school related expenses amounting to $5,250 or less with your wages, tips, and other compensation shown in box 1 of your W-2, ask your employer for a corrected W-2. If you have received amounts for graduate school related expenses that are includable in gross income, you may deduct expenses attributable to those amounts on Form 1040, Schedule A (PDF), Itemized Deductions.


On my Form W-2, why would line 1, wages, tips, other compensation, be different from line 3, social security wages, and line 5, medicare wages and tips?

When the amount in box 1 is less than the amount in boxes 3 and 5, you have received some employee compensation that is not subject to Federal income tax but is subject to Social Security and Medicare taxes. The most common example of this is deferred compensation, e.g. contributions to a 401(k) plan. Another example is an employee benefit plan that provides for the contribution of pretax dollars (e.g. cafeteria plan, flexible spending arrangement, dependent care plan, etc.).

When the amount in box 1 is more than the amount in boxes 3 and 5, you have received some employee compensation that is not defined as wages for the purpose of social security and Medicare taxes. An example of this would be when a child works for his or her parent in the parent's trade or business and is under age 18.


Is my employer supposed to include mileage reimbursement as a part of my gross income on my Form W-2, and do I include it on my return as wages, tips & salaries?

That depends on whether you were reimbursed under an accountable plan or under a nonaccountable plan. Generally, an employer will have an accountable plan if it pays business expenses that would otherwise be deductible by the employee, requires the employee to substantiate the expense, and does not permit the employee to keep any reimbursements that exceed expenses. If the employer does not use an accountable plan, mileage reimbursement would be included in your wages on Form W-2. For more information on reimbursements and accountable plans, refer to Chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses.

If your mileage reimbursement is included in box 1 on Form W-2, you need to enter that amount on the "wages, salaries, and tips" line of your tax return. If you itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions, you may deduct the business transportation expense as an employee business expense, subject to the 2% limitation of adjusted gross income. You may usually deduct either your actual business automobile expenses or use the standard mileage rate. For more information on when you may use the standard mileage rate, refer to Chapter 4 of Publication 463, Travel, Entertainment, Gift, and Car Expenses.


Is there any amount of wages too low to report on my tax return?

There is no wage amount too low that you would not include in gross income on your tax return. If your total income were below your filing requirement, however, you would not have to file a tax return. However, you may wish to file to claim a refund of withheld taxes. For information on filing requirements, please refer to the instructions for your income tax form.


4.10 Interest/Dividends/Other Types of Income: Ministers' Compensation & Housing Allowance

For a minister, is the housing allowance included in box 1 with wages?

No. The church would enter the amount of any parsonage allowance and any utilities allowance in box 14 of Form W-2. If the housing allowance exceeds the minister's qualified expenses, the minister would add the excess to the wage amount and enter the sum on line 7 of Form 1040.


12.4 Small Business/Self-Employed/Other Business: Form W–4 & Wage Withholding

I hired a babysitter to care for my children in my home. Do I need to withhold taxes on her wages?

Household employees include housekeepers, maids, baby-sitters, gardeners, and others who work in or around your private residence as your employees. If you pay a household employee cash wages of $1,400 or more in 2003, you generally must withhold social security and Medicare taxes from all cash wages you pay to that employee. For specific information, refer to Tax Topic 756, Employment Taxes for Household Employees , or Publication 926, Household Employer's Tax Guide .


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