Wage Tax Info
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) |
Article from www.adp.com