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I am a salaried full-time employee at my company in California, USA.

I noticed on both my final 2014 paystub and on my W-2 form that the paid time off (PTO) I took for vacation last year was listed as extra taxable income. Basically, my company computed the extra income by taking the N vacation and multiplying it by my pro-rated daily pay rate (even though I am on a salary).

For example, if I made a $100,000 salary last year (pro-rated to be $400 per day) and took 5 days off, then my total income showed up as $100,000 + 5 x $400 = $102,000 on my W-2 form. However, the pay I received was exactly $100,000 not $102,000.

I don't understand why the PTO shows up as extra income that I never received but that I have to pay tax for. I am already paid on a salary, so I received my monthly salary even when I took the PTO days off. Would should there be extra taxable income?

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    Ask your HR department. What was the value in Box 1 on your W2? Are you paid biweekly or (bi)monthly? If it's biweekly you won't add up to exactly 100k. – Rocky Jan 27 '15 at 0:15
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    How's $100K being $47 per day? – littleadv Jan 27 '15 at 0:16
  • @littleadv: Sorry, I miscalculated. There are about 250 working days in a year, so I changed it to be $100K/250 = $400 per day. – stackoverflowuser2010 Jan 27 '15 at 0:21
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    So your PTO was a separate line item, but you still got your expected 100k salary? so your work pay was 98k, or is your salary 100k and its says you got 102k? the latter would be odd as it sounds like you got PTO in addition to normal wages for the day. – Andy Jan 27 '15 at 1:46
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    Then you should go back and check your payslips to see when the $2K were reported, and if you can't find it - go to the payroll person to have the W2 corrected. – littleadv Jan 27 '15 at 3:29
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No, PTO should not be calculated like that.

The tax office only cares about how much you were paid. They don't care how much you had to work to receive that. If you had been paid $100,000 for working one week, or one day, they don't care.

The other way of looking at it is that you were paid $98,000 for working and $2000 as a benefit. You would be taxed on the sum of those, which is still $100,000.

If you look carefully through your payslips, and compare with your W2, you should be able to see whether they have actually paid you $102,000 gross. If not there will be a discrepancy between that and the W2.

  • yeh the hint is "paid" does the OP really earn a 100k and not get that? – Pepone Jan 27 '15 at 22:17
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I'd bring this up to your payroll department and ask them to issue a corrected W2. It still might be that you're wrong about something, but at the very least they can explain it, however it does sound like a mistake.

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Yes. PTO, typically the sum of holidays, vacation, and sick days, are treated as income and should hit the W2 the same.

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    I've never had PTO, accrued or used show up on my W2. Those are all just ways to get paid a day you'd normally not, so I dont see how they'd raise your taxable income by using them (by not using them maybe, if your employer pays out unused days, which is rare). – Andy Jan 27 '15 at 1:44
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    I didn't say they raised one's income, I only answered the question title. The PTO days are taxed like any worked day. – JTP - Apologise to Monica Jan 27 '15 at 1:48
  • Right but the op sounds like he ended up with 102k not the 100k which is his salary. At least I think that's what he's saying, its not completely clear. – Andy Jan 27 '15 at 1:51
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    @Andy: Yes, my salary is $100K and it says I got $102K. I didn't really receive the additional (gross) $2K in my bank account, but I am getting taxed for it. – stackoverflowuser2010 Jan 27 '15 at 2:11

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