Reference: Minnesota Law, §268.035 Subd.29
All payments in cash, goods, or any other medium to employees for services performed in covered employment are wages and must be reported; however, not all wages are taxable. Reference the Taxable Wage Base section of this handbook for more information.
The definition of wages includes, but is not limited to, the following types of compensation which must be reported on the quarterly wage detail report:
- Cash wages
- Tips and gratuities
- Awards and prizes
- Severance payments
- Vacation and holiday pay
- Standby pay
- Reasonable value of meals, rent (including caretaker rent reductions), housing, or any similar advantage
- Back pay as of the date of payment
- Sick pay and accident disability payments, except as provided under Excluded Wages
- Payments made under a deferred compensation or cafeteria plan, discussed under Employee Benefit Plans
Employee benefit plans EBP
Employee benefit plans offer favorable treatment of contributions for federal and state income tax purposes. Payments made under such benefit plans are exempt from income tax; however, this does not mean that the payments are also exempt from unemployment insurance tax.
An employee profit sharing or stock bonus plan, also known as a deferred compensation plan or a salary reduction plan, authorized by Section 401(k) or Section 457(b) of the Internal Revenue Code. Payments made under this plan or any other deferred compensation plan based on a trust described in Section 401(a), Section 403(a) of the Internal Revenue Code must be reported if the employee can choose to receive the payments in cash.
A plan that allows participants to choose from two or more cash and statutory non-taxable benefits. Because cash is an option, all payments to cafeteria plans are wages and must be reported.
Reference: Minnesota Law, §268.035 Subd.29
The following types of compensation are excluded from the definition of wages and do not need to be reported on the quarterly wage detail report.
- Payments for retirement, medical and hospitalization expenses, and death, if the payments are made under a plan or system for employees generally or for a class or classes of employees. Exempt payments include those paid for insurance or annuities or into a fund to provide for eventual payment to the employee.
- Sick pay paid for periods of sickness or injury after the end of six calendar months after the calendar month in which the employee last worked.
- Sick pay paid by a third party, such as an insurance company, or disability payments made under a workers' compensation law.
- Payments made into a fund, or for the purchase of insurance or an annuity, to provide for sickness or accident disability payments to employees under a plan or system established by the employer which provides for employees generally or for a class or classes of employees.
- The value of any special discount or markdown allowed to an employee in goods purchased or services supplied by the employer if the purchases are optional and do not constitute regular or systematic remuneration for services rendered.
- Customary and reasonable director's fees paid to individuals who are not otherwise employed by the corporation of which they are directors.
- Allowances to employees for reimbursement of meal expenses when employees are required to perform work after their regular hours.
- Payments made to or on behalf of an employee for legal or dental services plans, if provided for all employees generally or for a class or classes of employees.
- Royalties to an owner of a franchise, license, copyright, patent, oil, mineral, or other right.
- Amounts paid specifically as advances or reimbursements for traveling or other bona fide ordinary and necessary expenses. The payments must be identified either by making separate payments or by specifically indicating the separate amounts where both wages and expense allowances are combined in a single payment.
- Residual payments to radio and television artists that accrue after the production of musical jingles, spot announcements, radio transcriptions, and film sound tracks.
- Payment by an employer of a domestic or agricultural employee's portion of Social Security tax.
- The value of parking facilities provided or paid for by an employer, in whole or in part, if provided for all employees generally or for a class or classes of employees.
- Any payment made to, or on behalf of, an employer or beneficiary from or to a trust, section 401(a) of the federal Internal Revenue Code, that is exempt from tax under section 501(a) at the time of the payment unless the payment is made to an employee of the trust, or to an annuity plan that, at the time of the payment, is a plan described in section 403(a).