Personal Income Tax (PIT), also known as individual income tax, is a tax on employee earnings. Earned income includes money earned by employees or as the owner of a business.
Benefits and Personal Income Tax
Understanding how benefits interact with personal income tax can help employers choose the best options to help employees balance their personal finances. By applying pre-tax deductions, some benefits reduce an employee’s total taxable income. The result is an easing of the amount paid in personal income tax by the employee.
Currently, pre-tax deductions are possible for medical insurance premiums, contributions to retirement accounts, childcare expenses, and certain business-related expenses. For a full list of pre-tax deductions, refer to our glossary entry on pre-tax deductions to personal income tax.
Personal Income Tax Forms for Employers
The most common tax forms sent by employers to their employees are Form W-2 (Tax and Wage Statement) and Form 1095-C (Employer-Provided Health Insurance Offer and Coverage). Self-employed contractors generally receive Form 1099-MISC or Form 1099-NEC.