Q:

What is the purpose of IRS Publication 525?

A:

Quick Answer

IRS Publication 525 discusses varieties of taxable and nontaxable income such as wages, fringe benefits, bartering, partnerships, royalties, pensions, life insurance proceeds, welfare and public assistance. Employee compensation is one of the most common forms of taxable income, and normally an employer takes taxes out of an employee's net income.

Continue Reading

Full Answer

Employers report taxable income from employee compensation on IRS Form W-2, which is used to report income on tax forms filed before the tax deadline. Wages such as salaries, commissions, fees, tips and stock options are reported on Form W-2. Different sections of Form W-2 denote types of taxable income reported on Form 1040.

Some benefits are not included as taxable income for employees, such as child care benefits, holiday gifts, up to $5,250 of educational assistance, product discounts, group-term life insurance and certain meals, as of October 2014. Some of these benefits have minimum requirements, and others have certain conditions.

If an employer does not withhold Social Security and Medicare taxes from employee paychecks, the employee must file Form 8919. Employees who earn wages during the year must still file taxes even if an employer does not issue a Form W-2.

Independent contractors or self-employed taxpayers are taxed differently than employees. These types of income earners use Schedule C or Schedule C-EZ to report profits or losses to the IRS.

Learn more about Income Tax
Sources:

Related Questions

Explore