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Cash Wages Explained: Legal Definition and Key Insights
Definition & Meaning
Cash wages refer to any form of payment made to an employee in spendable money. This includes payments made via check, cash, money order, or direct deposit. It is important to note that cash wages do not include the value of noncash benefits such as food, lodging, clothing, or other items provided to the employee. Additionally, compensation packages that involve stock options, insurance, or fringe benefits are also excluded from the definition of cash wages.
Table of content
Legal Use & context
Cash wages are commonly referenced in employment law and taxation. They are considered ordinary income for tax purposes, which means they are subject to federal and state taxation. Employers are required to withhold payroll taxes and report these wages. In some cases, cash wages may be paid "under the table" to avoid taxes, which is illegal and can lead to criminal charges.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: An employee receives a paycheck every two weeks that includes their earned cash wages. This payment is made through direct deposit to their bank account.
Example 2: A restaurant pays its waitstaff in cash at the end of each shift. While this is a common practice, if the restaurant does not report these wages for tax purposes, it could face legal consequences. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Cash Wage Regulations
California
Requires employers to provide itemized wage statements.
New York
Employers must pay minimum wage in cash wages.
Texas
Less stringent reporting requirements for cash wages.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Cash wages
Payments made to employees in cash or equivalent forms.
Gross income
Total income before taxes and deductions.
Net income
Income remaining after taxes and deductions.
Common misunderstandings
What to do if this term applies to you
If you are an employer, ensure that you are properly reporting cash wages and withholding the necessary taxes. If you are an employee receiving cash wages, keep accurate records of your earnings for tax purposes. For those seeking to create or manage employment agreements, consider exploring US Legal Forms' templates for assistance. If you face complex issues related to cash wages, consulting a legal professional is advisable.
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