Discussion:W-2 Wages Box 1 higher than 3 and 5
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Discussion Forum Index --> Tax Questions --> W-2 Wages Box 1 higher than 3 and 5
| 24 March 2008 | |
| The topic says it all.
Box 1 wages 20,000 Box 3 wages 18,000 Box 5 wages 18,000 difference of 2,000 is employee contributions to premium only plan and for purchase of an aflac insurance policy. controller claims W-2's have been prepared this way for years. I told her I don't know of too many situations where box 1 would be higher and that this situation is not one of them. She indicated that she filed her taxes and there were no problems with hers. My question to her was that if she filed and used the incorrect numbers on her return, sure it will go through, but she then payed too much tax. I do consider myself pretty fluent in Cafeteria/flex/sec 125 plans. And I will probably direct her to this site to read your answers. Thanks in advance. Question to you folks: Am I missing something here? | |
| 24 March 2008 | |
| That $2000 is pretaxed and should go to Box 14 for Section 125 plans assuming Aflac is health insurance. | |
Death&Taxes (talk|edits) said: | 24 March 2008 |
| Isn't AFLAC like a disability policy? Tax it now or tax it when she collects. | |
| 24 March 2008 | |
| I threw the AFLAC in because that is also what I thought. Let's exclude AFLAC for a sec.
Total of $2,000 is listed in Box 14 as sec 125 Boz 1, 3 and 5 should all be the same - $18,000. that is where I want my confirmation, even though I know the answer. | |
| 24 March 2008 | |
| Thanks so far for the replies.
Now, as to AFLAC - If it is truly a disability policy, and I don't pretend to know whether it is or not, shouldn't this deduction from emplyees be after tax for maximum benefit protection? I will be linking this page to the Controller in question and I am sure she will be grateful for confirming my correctness. | |
| 25 March 2008 | |
| What is up with this. Another client. This one a new one btw. Anyway. Same situation with about 1,000 in pre-tax health ins deducted yet Box 1 was not adjusted
Box 1 20,000 Box 3 19,000 Box 5 19,000 Hey, don't you know, anyone can be an accountant. Just buy quickbooks, it has payroll included. | |
Scottycoyote (talk|edits) said: | 25 March 2008 |
| i agree, either boxes 1 3 and 5 are the same, of boxes 3 and 5 should be more depending on the deductions we are talking about. They clearly are not getting the "pre-tax" benefit of these items as its being currently done on the w-2s.
huked on kwikbooks werked fer me | |
| March 25, 2008 | |
| First scenario, agreed, all boxes would be the same whether pre-tax or after-tax benefit.
One of the things I recommend for all of my clients with payroll is doing an annual payroll reconciliation. Not only are all of the payroll tax returns checked for proper annual totals, but total tax is looked at as well. | |
| 25 March 2008 | |
| I'm new to the site, so I hope I'm not making a faux pas and stating something that everyone has already taken to be understood, however...I can think of one situation where W-2 box 1 may be higher (and could potentially apply to your last scenario): health insurance premiums for >2% S Corp SH. Added to box 1 as wages, not subj to FICA and MC. | |
| 25 March 2008 | |
| not a faux pas. Although that scenario was not a reason fo rthe two scenarios I mentioned. Both are strictly pre-tax health isurance premiums.
First issue was a controller implementing a new flex spending or premium only plan and just didn't finalize everything in the set up area of quickbooks. I know their auditors and when she called them, they agreed with me. The person working on their VITA program disagreed though. lol. 2nd was a local experienced bookkeeper. My tax clients employer is leaving her because of this. | |
| March 25, 2008 | |
| So are amended PR returns being prepared in either of these cases? While the amounts may not be "material" to the employers, I bet they are to the employees. | |
| 25 March 2008 | |
| She didn't believe me at first young Natalie, but after she double checked she thanked me profusely and she said she may take me up on my offer to help her after tax season set up quickbooks properly.
She then wanted to know why her accountant didn't catch it, so naturally I had to cover for him. Told her he must have been feeding his bird. | |
Taxestaxes (talk|edits) said: | 25 March 2008 |
| Had the same scenario happen with Quickbooks. W2 wages, box 1 were wrong, I knew this because of comparing to last paycheck stub. employee was getting benefit of pretax, its just that the w2 was printing wrong, some little something in quickbooks. Anyway, they had been doing this for YEARS- think of all those people who were reporting higher wages!!!! What a shame- you are right, anyone can buy quickbooks and think they can do payroll!! | |
| 25 March 2008 | |
| The problem gets bad when the employees realize this and realize that that the employer could be held responible. Let's say the deadline to file has passed before they realize it, employer could be on the hook.
what about everyone that filed, I know I'd be, hey boss man, guess who is paying for my amended return. | |
Taxestaxes (talk|edits) said: | 25 March 2008 |
| Exactly!!! They corrected the W2's for 2007, but thats it, Honestly, employees dont know about the problem!! If they did, I know they would be fuming! | |
| March 26, 2008 | |
| I'm glad to hear the controller has seen the light Fred.
Birds eat a lot, so no doubt the accountant was feeding his bird. Or possibly taking it to flight school. | |
