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Simple English definitions for legal terms
noncovered wages
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A quick definition of noncovered wages:
Noncovered wages are wages that a person does not have to pay social-security taxes on. Wages are payments for work or services, usually based on time worked or quantity produced. They can include salaries, commissions, vacation pay, bonuses, and other benefits received from an employer. Employers usually have to withhold income taxes from wages. Covered wages are wages on which a person is required to pay social-security taxes.
A more thorough explanation:
Definition: Noncovered wages refer to wages on which a person is not required to pay social-security taxes.
Example: If an individual works for an employer who is not covered by the Social Security Act, then the wages earned by that individual will be considered noncovered wages.
This means that the employer is not required to withhold Social Security taxes from the employee's paycheck, and the employee is not required to pay Social Security taxes on their earnings.
Noncovered wages are different from covered wages, which are wages on which a person is required to pay Social Security taxes. Covered wages are subject to Social Security taxes, which are used to fund Social Security benefits for retired, disabled, and deceased workers and their families.
Example: If an individual works for an employer who is covered by the Social Security Act, then the wages earned by that individual will be considered covered wages.
This means that the employer is required to withhold Social Security taxes from the employee's paycheck, and the employee is required to pay Social Security taxes on their earnings.
Overall, noncovered wages are wages that are exempt from Social Security taxes, while covered wages are wages that are subject to Social Security taxes.