Year-To-Date Earnings Definition

Term Definition
Year-to-date earnings are the gross earnings for an employee for the period from the beginning of the year through the date of the report or payroll record.  It includes only payments actually made to or on behalf of the employee.  Earnings are defined in IRS 1040 instructionsfor items included on line 7, pages 19-20 and in the IRS general instructions for form W2.

Year-to-date earnings for the entire company reflect the gross wages paid to the employees.  To get a complete picture of the expenses, the amount must be adjusted to reflect the employer’s portion of payroll taxes and any other employer expenses such as their portion of the cost of benefits.

Extended Definition
Year-to-date earnings, as it appears on an employee’s payroll records, includes the gross amount of all actual payments made to or on behalf of the employee.

It does not include payments that have been earned but not yet paid, such as a bonus that is normally paid in a later period towards the end of the year.  It does include any payments not earned in this year, but paid in this year, such as a commission for a sale made in the previous year but not actually paid until this year.

It also does not include any payments that are outside the payroll system.  For example, premiums for life insurance paid by the employer that exceed the allowable amount may not be included in year-to-date earnings from the payroll system but will be included later when tax documents are filed.

Further, the comparable entry on the firm’s books for total business payroll expenses, year-to-date, may be different than the payroll system totals because of post-closing entries. Such entries are made to reflect accrued expenses not yet recognized in the payroll system and other employer-only expenses.

Related Blog Article:
Year-to-Date Payroll Earnings