What is included in Federal Taxable Wages?

Federal Taxable Wages encompass all components of an employee’s earnings that are subject to federal income tax. The correct answer acknowledges that taxable wages are calculated as gross earnings minus any tax-exempt wages (such as certain types of benefits that are not subject to income tax), plus Group Term Life (GTL) insurance amounts.

Gross earnings represent the total amount earned by an employee before any deductions. However, some wages may be exempt from federal taxes, which is why they need to be subtracted. Additionally, GTL insurance is typically considered a taxable fringe benefit when it exceeds a certain threshold, making it necessary to add this amount back into the calculation of taxable wages.

Therefore, Option D accurately represents the comprehensive view of what constitutes Federal Taxable Wages by reflecting both the exclusions and inclusions necessary for accurate payroll processing.