Taxable wages
Taxable Wages, in payroll
In a company, payroll is the sum of all financial records of salaries for an employee, wages, bonuses and deductions. In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time. Payroll plays a major role in a company for several reasons...

, is the sum of all earnings by an employee that are eligible for a particular type of tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

. Each tax is different and has different regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...

s about limits to the amount of wage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...

s that can be considered taxable with respect to that tax.


A common example, the Federal Unemployment Tax Act
Federal Unemployment Tax Act
The Federal Unemployment Tax Act is a United States federal law that imposes a federal employer tax used to help fund state workforce agencies. Employers report this tax by filing an annual Form 940 with the Internal Revenue Service...

 (FUTA) tax in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 had, in 2004, a taxable wage limit of $7,000. As described on the form which records information for this tax paid by employers, U.S. Internal Revenue Service form 940, only the first $7,000 of wages earned by each employee can be considered for the FUTA tax.

NameWagesTaxable Wages
Joe Spittle8,5007,000
Jeff Wrench4,0004,000
Jane Lip500500
Erica Derg4,5004,500
Total Taxable Wages:16,000

In this example, Joe Spittle earns $8500. Since this is higher than the limit of FUTA for taxable wages, which is $7,000, the FUTA tax calculated for Joe cannot be calculated against any more than the limit of $7,000.

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