Chapter 4: Wages, Salaries, Tips, etc.

Chapter 4 of the Free Tax Course deals with wages, salaries, tips, etc. These wages are often reported on W-2 tax form or form 1099-MISC for miscellaneous income. In this chapter of Free Tax Course, you will learn about different types of income such as taxable income, earned income, unearned income and nontaxable income.

Definition of wages and salaries

Wages and salaries are compensation paid by your employer for work or services performed. Compensation also includes:

• awards,
• bonuses
• sick pay
• other taxable employee benefits

Definition of tips

Tips are income received from customers. Tips include:

• cash received directly from customers
• tips from charge cards that an employer pays to an employee
• employee's share of any tips from a tip splitting arrangement

Types of Income

Understanding W-2 Forms

Reporting Income

Taxable Compensation

Tip Income Reporting Policy

• What if I Don't Report Tip Income?

Other Line 7 Income on 1040

Nontaxable Compensation

Summary of Chapter 3 of Free Tax Course