Amount of Average Annual Wages...

Q.  How is the amount of average annual wages determined?

1. The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer during the employer's tax year to employees taken into account in Q/A-10 by (2) the number of the employer's FTEs for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). Only wages that are paid for hours of service determined in accordance with Q/A-10 are taken into account. Wages for this purpose means wages as defined for FICA purposes (without regard to the wage base limitation). See Q/A-13 through 15 for information on which employees are not counted as employees for purposes of determining the amount of average annual wages.

Example.

For the 2010 tax year, an employer pays $224,000 in wages and has 10 FTEs.

The employer's average annual wages would be: $22,000 ($224,000 divided by 10 = $22,400, rounded down to the nearest $1,000)