Under FICA, what type of payment is classified as wages?

Under the Federal Insurance Contributions Act (FICA), wages are defined as payments made for services performed by an employee for their employer. This classification includes various types of compensation, such as salaries, hourly wages, and cash tips received by employees.

Cash tips, which are typically considered supplemental income, are specifically included in the definition of wages for FICA tax purposes, as these tips are earnings received for providing services. Employees who receive tips are required to report them, and these amounts are subject to Social Security and Medicare taxes, just like regular wages.

In contrast, gifts from employers, scholarships, and child support payments do not qualify as wages under FICA. Gifts are not payments for services, scholarships are generally educational assistance and not remuneration for work performed, and child support payments are considered family law obligations rather than income earned through employment. Therefore, cash tips received by employees is the correct classification of payment that falls under the definition of wages for FICA purposes.