How should an employer report wages and benefits paid to an employee in anticipation of employment if the employee is terminated before the first day of work?

Author: Alice Gilman

Sign-on bonuses, taxable relocation expenses and other benefits paid to or provided for an individual in anticipation of employment are wages subject to federal income tax withholding and to FICA and FUTA taxes. An employer must report these wages on Form W-2, Wage and Tax Statement, not on Form 1099, Miscellaneous Income, regardless of the status of the employment relationship (i.e., pre-employed, retired, laid off), at the time the payments are made or the benefits are provided.