A person could be exempt from income tax (box 1 wages = zero) but still pay social security and medicare tax if all their income was put into pre-tax benefits like health insurance premiums, pre-tax retirement account, flexible spending account, health savings account.
Full Answer
What does box 3 mean on my paycheck?
Box 3 — Shows your wages subject to Social Security tax. (This amount may not be the same as reported in Box 1) Box 4 — Shows the amount of Social Security tax withheld from your pay. Box 5 — Shows your wages subject to Medicare tax.
What happens if you earn above the Social Security wage base?
The employee earned above the SS wage base In some instances, Box 1 can be higher than Box 3. After an employee earns above the Social Security wage base, they no longer need to pay Social Security tax. Because earnings above the Social Security wage base aren’t subject to SS tax, don’t report them in Box 3. The 2020 wage base is $137,700.
Are W-2 box 1 wages lower than box 3 wages?
If an employee elected to contribute to a pre-tax retirement plan, their W-2 Box 1 wages are likely lower than their Box 3 wages. An employee’s elected retirement plan contributions are not subject to federal income taxes. However, these contributions are subject to Social Security and Medicare taxes.
What's in my Box 1 (total wages)?
My Box 1 (total wages) is completely blank. However my Box 3 (social security wages), Box 4 (SS tax withheld), Box 5 (Medicare wages), Box 6 (Medicare tax withheld) all have amounts in them. It sounds like your employer made a mistake. Box 1 should include your wages plus your tips minus any pre-tax payroll deductions like health insurance.
Why does my W-2 not have Social Security wages?
Social Security wages should be in box 3 and the Social Security Taxes withheld should be in box 4 of the W-2. Contact your employer for either an explanation of why there are no SS wages or taxes withheld or to get a corrected W-2.
Why are your wages in box 1 less than your Social Security wages on box 3?
If you earned more than $118,500 last year, you ran up against the Social Security tax cap, which is the max income you pay Social Security taxes on. In that case, your Box 3 wages will likely be less than your Box 1 wages.
Are Medicare wages the same as Social Security wages?
Box 1 (Wages, Tips and Other Compensation) represents the amount of compensation taxable for federal income tax purposes while box 3 (Social Security Wages) represents the portion taxable for social security purposes and box 5 (Medicare Wages) represents the portion taxable for Medicare tax purposes.
Why are Social Security wages and Medicare wages different?
The most common questions relate to why W-2 Wages differ from your final pay stub for the year, and why Federal and State Wages per your W-2 differ from Social Security and Medicare Wages per the W-2. The short answer is that the differences relate to what wage amounts are taxable in each case.
Why is my Social Security wages blank?
If your Box 3 is empty, it is possible that your occupation is not covered by Social Security (certain forms of student employment, members of religious orders, etc.). Do not try to report amounts that were not reported by your employer.
Why is Box 1 on my W-2 less than my salary?
If your Box 1, W-2 amount is less than your salary, it is because you have pre-tax deductions from your salary under one or more employer plans. If you are not sure about your Box 1 amount, your payroll department can provide the details of the calculation of your Box 1 amount.
Should Social Security wages be the same as wages?
Social Security wages are not the same as gross income. While the amount of Social Security wages and gross income are often identical, they just as easily may not be. Gross income is the total of all compensation from which the amount of taxes and other withholdings are calculated.
Should Box 1 and Box 3 be the same on W-2?
The amounts in box 1 and box 3 of your W-2 will be different if you had a pre-tax deduction. Some pre-tax deductions reduce your taxable income (box 1) and your social security income (box 3). Other pre-tax deductions only reduce your taxable income (box 1).
Why does my W-2 say 0 federal tax withheld?
The fact that you have zero withheld for federal means you will probably not see any refund, but will end up owing taxes on the tax return. You need to go to your employer and ask to complete a new W-4 and make sure you've chosen the correct number of allowances.
Who is exempt from Social Security and Medicare withholding?
The Code grants an exemption from Social Security and Medicare taxes to nonimmigrant scholars, teachers, researchers, and trainees (including medical interns), physicians, au pairs, summer camp workers, and other non-students temporarily present in the United States in J-1, Q-1 or Q-2 status.
Do tax brackets include Social Security and Medicare?
What is FICA tax? FICA tax includes a 6.2% Social Security tax and 1.45% Medicare tax on earnings. In 2021, only the first $142,800 of earnings are subject to the Social Security tax ($147,000 in 2022). A 0.9% Medicare tax may apply to earnings over $200,000 for single filers/$250,000 for joint filers.
Why is Box 1 and Box 16 different on my W-2?
If retirement contributions are exempt from state income tax, Boxes 1 and 16 may be the same. If contributions are subject to state income tax, Box 16 may be higher than Box 1. For example, Pennsylvania requires employees to pay state income tax on retirement contributions.
Your employee earns tips
An employee who earns tips may also have different amounts in Boxes 1, 3, and 5. This is because tips are included in the amounts in boxes 1 and 5. They are separated out in box 3 and box 7 for Social Security.
Your employee is exempt from one or more Federal taxes
There are several types of employees who are not subject to some Federal taxes per IRS rules. Clergy, employees on a work Visa, and some family members of business owners are a few examples.
What to call if your W-2 does not match Social Security?
If you find that after making these adjustments to your Gross Pay YTD per your final pay stub, the result does not match Box 3 Social Security Wages and Box 5 Medicare Wages on your W-2, call Central Payroll, 617-495-8500, option 4 for assistance.
What is the Social Security base for 2019?
The Social Security Wage Base for 2019 was $132,900. To determine Social Security and Medicare taxable wages on your W-2, again begin with the Gross Pay YTD from your final pay stub and make the following adjustments if applicable:
What to call if your W-2 does not match Box 1?
If you find that after making these adjustments to your Gross Pay YTD per your final pay stub, the result does not match Box 1 Federal Wages and Box 16 State Wages on your W-2, call Central Payroll, 617-495-8500, option 4, for assistance.
What line on W-2 is the total of all W-2s?
You should include this amount on the wages line of your return. If you have more than one Form W-2, or you are married and your spouse also has one or more W-2s, the total of all forms’ Box 1 will be shown on Form 1040, line 1. Box 2 — Shows the total federal income tax withheld from your paycheck for the tax year.
Is it hard to complete W-2?
Completing taxes can be tricky. And while information like that found in W-2 boxes seem simple to complete at first, Form W-2 codes could be hard to complete and interpret on your own.
What is Box 2 in Social Security?
Box 2 shows how much federal income tax you withheld from Box 1 wages throughout the year. The numbers in Box 1 and Box 2 help determine an employee’s tax refund or liability. Most benefits that are exempt from federal income tax are not exempt from Social Security tax.
What is box 1 in the IRS?
Box 1—wages, tips, other compensation—contains an employee’s total wages subject to federal income tax. Do not include pre-tax benefits in Box 1. Per the IRS, list the following taxable wages, tips, and other compensation in Box 1: Total wages, bonuses, prizes, and awards you paid an employee. Noncash payments.
What box do you report taxable wages in 2020?
Let’s say you pay an employee $150,000 in taxable wages in 2020. You would enter “$150,000” in Box 1 and “$137,700” in Box 3. Because there is no Medicare wage base, you must also report “$150,000” in Box 5.
What are the boxes for retirement contributions?
Other states tax contributions at the state level. If retirement contributions are exempt from state income tax, Boxes 1 and 16 may be the same. If contributions are subject to state income tax, Box 16 may be higher than Box 1.
Why are boxes 1 and 3 different?
Because some benefits are not subject to federal income tax, Boxes 1 and 3 (as well as Box 5) can have different values. Likewise, you may see W-2 Box 1 and Box 16 differ. And, the values in Box 1 and Box 18 may also vary.
Do you report earnings above SS tax?
After an employee earns above the Social Security wage base, they no longer need to pay Social Security tax. Because earnings above the Social Security wage base aren’t subject to SS tax, don’t report them in Box 3.
Is Box 16 higher than Box 1?
If contributions are subject to state income tax, Box 16 may be higher than Box 1. For example, Pennsylvania requires employees to pay state income tax on retirement contributions. On the other hand, Ohio aligns itself with federal requirements and exempts retirement contributions from state income tax.