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Taxable Compensation

Below is the list of what taxable compensation include. Employers generally include the following types of taxable employee compensation in box 1 of the W-2 form.

  1. Regular pay in cash or the equivalent of cash
  2. Commissions or other pay from your employer
  3. Bonuses and awards for outstanding work whether in cash or in the form of goods or services. The value of a prize such as a vacation is included in your gross income in the tax year the prize is available for your use whether or not your actually use it then.
  4. Sick pay you receive from your employer, a welfare fund, a state sickness or disability fund, an employee or employer's association, or an employer paid insurance plan. If you paid the premiums on the insurance policy, the benefits are generally not taxable.
  5. Holiday gifts of cash or that can easily be exchanged for cash, such as a gift certificate, regardless of the amount involved. The value of a noncash gift of insignificant cost, such as a turkey or a ham, does not have to be included in your gross income.
  6. Severance pay upon termination of your employment
  7. Reimbursements from your employer for travel, transportation or other business expenses unless you are required to account for such expenses to your employer and to return amounts in excess of the accounted for expenses to your employer
  8. Employer provided vehicles used for personal driving including commuting to and from work
  9. Disability pensions from an employer paid plan received before you reached minimum retirement age whether these are reported on Form W-2 or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc. Beginning the day after you reach minimum retirement age, these payments are taxes as a pension or annuity and will be reported to you on a Form 1099-R and entered on lines 16a (Pensions and Annuities) and 16b (Taxable amounts) of form 1040.
  10. Supplemental unemployment benefits from an employer financed fund (to which you did not contribute)

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