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Non-wage Compensation

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Definition

Non-wage compensation is also known as wages in kind (WIK). It is non-salary compensation in addition to your regular salary. For example, a business vehicle is provided to an employee for his/her use. All business use is non-taxable, but any personal use is taxable. Some other examples of WIK include, but are not limited to, cash awards, gift certificates, football/basketball tickets, taxable moving expenses, etc.

All cash items (of any amount) and items that can be converted to cash (gift certificates) are subject to the following taxes:

  • Old age, survivors and disability insurance (OASDI, traditionally referred to as Social Security) gross wages are taxable at 6.2%, up to a maximum of $102,000 for 2008)
  • Hospitalization Insurance (HI, traditionally referred to as Medicare) gross wages are taxable at 1.45%, with no maximum.
  • Federal gross wages are taxable at 25%
  • State gross wages are taxable at 6%

NC State deducts only Federal Insurance Contributions Act (FICA) taxes (OASDI & HI) on non-cash awards (such as season tickets to sporting events or complimentary parking) at the rates shown above.

Although federal and state taxes are not withheld on non-cash items, the gross amounts will be added to the recipients' federal and state gross wages on their Form W-2 and will be taxable when they file their annual tax returns.

Non-wage Compensation Reporting and Taxation Matrix

 

Last Edited: June 19th, 2013