Compliance Connection | W2 Taxable Wages

W-2 Taxable Wages

Responding to employee W-2 inquiries is much easier once you know the pay elements used to determine the taxable wages on the W-2. The explanation which follows reflects only the most common pay elements that determine taxable wages on the W-2.

Pay Elements Used To Determine Taxable Wages.


Box 1: Wages, Tips and Other Compensation

Gross Earnings (Includes taxable fringe benefits and tips)

Minus

Federal Tax Exempt Wages

Minus

Deferred Compensation

Minus

Meals

Minus

Cafeteria 125 Benefits (May vary based on the benefit)

Plus

Group-Term Life Insurance (cost of coverage over $50,000)

Plus

Third-Party Sick pay

Plus

Other Compensation



Box 3: Social Security Wages

Gross Earnings (Includes taxable fringe benefits and tips)

Minus

Social Security Exempt Wages

Minus

Meals

Minus

Tips (Social Security Tips must print separately in Box 7)

Minus

Cafeteria 125 Benefits (May vary based on the benefit)

Plus

Group-Term Life Insurance (cost of coverage over $50,000)

Plus

Third-Party Sick pay


 

Box 5: Medicare Wages and Tips

Minus

Medicare Exempt Wages

Minus

Meals

Minus

Cafeteria 125 Benefits (May vary based on the benefit)

Plus

Group-Term Life Insurance (cost of coverage over $50,000)

Plus

Third-Party Sick pay



Box 16: State Wages, Tips, Etc.

Gross Earnings (Includes taxable fringe benefits and tips)

Minus

State Exempt Wages

Minus

Deferred Compensation (May vary by state)

Minus

Meals (May vary by state)

Minus

Cafeteria 125 Benefits (May vary based on the benefit and the state)

Plus

Group-Term Life Insurance (cost of coverage over $50,000)(May vary by state)

Plus

Third-Party Sick pay (May vary by state)

Plus

Other Compensation (May vary by state)

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