| There are specific guidelines provided by IRS on | | | | included in your income of present tax year. |
| which items are to be included in the employee's | | | | 7. Note received for services - If you receive a |
| gross income. It is better to know them well. | | | | secured note towards the payment for your |
| | | | services, you have to include the fair market |
| 1. Advance commissions - If you are receiving | | | | value of such note in the year in which you |
| some money by way of commission for services | | | | receive such note. However when you receive |
| to be performed in the future and if you'll maintain | | | | payments on that note at a later date, you need |
| your records on cash basis, you have to include | | | | not include that in your income. |
| these amounts in the year in which you receive | | | | 8. Severance pay - This money and the money |
| them. If you repay on core and commission in the | | | | you receive for cancellation of your employment |
| year of their receipt, you can reduce the amount | | | | contract has to be included in your income. |
| from your income. | | | | 9. Accrued payment for leave - If you receive |
| 2. Back pay awards - If you are awarded money | | | | this type of payment when you resign or retire, it |
| in a settlement or judgment for back pay, you | | | | will be included as your income and will be shown |
| need to include this in your income. This includes | | | | on your form W2. |
| money received for damages and unpaid Life | | | | 10. Outplacement services - If you opt to accept |
| Insurance & health premiums. The amount | | | | less amount of severance pay in order to receive |
| should also be reported by your employer on | | | | outplacement services, you have to include the |
| your form W2. | | | | unreduced amount of severance pay in your |
| 3. Bonuses and awards - If you receive these for | | | | income. However in this situation you can deduct |
| outstanding work, they need to be included in | | | | the value of such outplacement services as a |
| your income. These include prizes and vacation | | | | miscellaneous deduction. This deduction is subject |
| trips for meeting goals. If you receive such | | | | to normal two per cent of the AGI limit. |
| awards in the form of goods or services, the fair | | | | 11. Sick pay - If you receive pay when you are |
| market value of such goods or services has to | | | | sick or receive any money from an insurance |
| be included in your income. However if the | | | | company where your employer pays for the plan, |
| employer just promises you to pay a bonus, it is | | | | all this money needs to be included in your |
| not included unless you receive it actually. | | | | income. However if you have paid the premiums |
| 4. Employee achievement award - If you receive | | | | on such insurance policies, money received under |
| personal property other than cash or a gift | | | | such policies is not taxable. |
| certificate, towards an award for length of | | | | 12. Social security and Medicare taxes paid by the |
| service or safety achievement, you can exclude | | | | employer - If your employer pays these amounts |
| that amount from your income. However if the | | | | under an agreement with you, you have to |
| amount exceeds $1600, you need to include it in | | | | report this money as your taxable income on |
| your income. If a length of service award is given | | | | your tax return. |
| for less than five years of your service or if you | | | | 13. Stock appreciation rights - These rights |
| receive it within five years of receiving the | | | | granted by the employer are not included in your |
| previous award, you need to include it in your | | | | income until you actually exercise such right. When |
| income. | | | | you exercise such right, you may receive a cash |
| 5. Cost of living allowances - These are generally | | | | payment which is equal to be fair market value of |
| included in your income. | | | | the stock of the corporation on that date, less |
| 6. Non-qualified deferred compensation plans - | | | | the fair market value on the date of the right. |
| Your employer will report to you these amounts, | | | | You have to include such cash payment in your |
| which are not included in your income. However, if | | | | income. Remember, these are normally the types |
| any time during the year the plan fails to meet | | | | of compensation employees receive. If you |
| the specified requirements, or it is non operational | | | | receive any other compensation than above, you |
| under those requirements, the amounts under | | | | need to talk to a tax consultant to find out its tax |
| that plan for the present tax year as well as the | | | | treatment. |
| amounts received in all proceeding tax year is are | | | | |