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Taxable wages: Wikis

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Taxable Wages, in payroll, is the sum of all earnings by an employee that are eligible for a particular type of tax. Each tax is different and has different regulations about limits to the amount of wages that can be considered taxable with respect to that tax.

Example

A common example, FUTA Tax, which stands for the Federal Unemployment Tax Act, in the United States, currently (in 2004) has a taxable wage limit of 7000 dollars. As described on the form which records information for this tax paid by employers, IRS form 940, only the first 7000 dollars of wages earned by each employee can be considered for the FUTA tax.

Name Wages Taxable Wages
Joe Spittle 8500 7000
Jeff Wrench 4000 4000
Jane Lip 500 500
Erica Derg 4500 4500
Total Taxable Wages: 16000

In this example, Joe Spittle earns 8500. Since this is higher than the limit of FUTA for taxable wages, which is 7000, the FUTA tax calculated for Joe cannot be calculated against any more than the limit of 7000.

See also

External links


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