Discussion:Gross Wages on W-2 vs paid out vs tax return
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Discussion Forum Index --> Tax Questions --> Gross Wages on W-2 vs paid out vs tax return
| January 13, 2007 | |
| Is it ok if your gross wages on your Profit & Loss do not match the wages on a corporate tax return? For example. You paid out $20,000 in wages. $1,000 of this was pre-tax medical insurance deducted from the wages. So the W-2 wages show $19,000, but your Profit & Loss wages show $20,000. When we do the tax return, we should match the wages line to the W-2's (W-3) correct? If so, what do we do with the other $1,000 paid out showing in with the wages? | |
| 13 January 2007 | |
| Yes. Payroll is reported on W-2's on cash basis. Wages reported on corporate tax return may be either cash or accrual basis and therefore quite commonly do not tie out. | |
| 13 January 2007 | |
| I agree with Jdugancpa - but not for the same reason. There was no mention of cash/accrual and he probably misunderstood "pre-tax" to mean prepaid expenses.
The non taxable fringe benefits naturally would make the amounts differ. The Profit and Loss statement doesn't distinguish between taxable vs nontaxable wages-but the W-2s do. | |
| January 13, 2007 | |
| Thanks Uncle Sam. Everything is cash basis so that issue does not apply. I was meaning in terms of the IRS matching coprorate or S corporate tax returns wages lines to the company's W-3, when what we input on the return from the Profit & Loss will be more than what the W-3 shows. | |
| January 13, 2007 | |
| On a cash basis, the amount deducted for wages on a corporate return should match the gross wages on all employees' W-2 forms, line 1 (less any work credits claimed, which doesn't apply to this question). The $1,000 would be recorded in a different account on the income statement--something like Pre-Tax Medical Insurance. | |
| January 13, 2007 | |
| See Publication 542, page 9, Line 13-Salaries and Wages | |
| 13 January 2007 | |
| I'm not very good at PR but aren't tips reported on line one also? Thus not matching the corporate return?
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| January 13, 2007 | |
| Yes, tips are included in box 1 on the W-2 form, but when the IRS matches wages, they take into consideration different amounts reported elsewhere on the W-2 forms and on the corporate tax return. Social Security tips are also reported in box 7 on the W-2 form. I didn't go into all of that, because it wasn't related to the original question. | |
| 13 January 2007 | |
| There are a lot of things that make your W-2's different than your wages on you tax return. You should have a worksheet in your files to reconcile these differences. Not for IRS, but for yourself....to be sure they do tie out. | |
| January 13, 2007 | |
| They do tie out, I was just wondering if it was ok that the wages line on the tax return does not match the W-2 or our P&L. Thanks. | |
| 13 January 2007 | |
| Check to be sure that any amounts in box 10 or box 14 of the w-2's for cafeteria plan deductions and dependent care benefits tie back to the I/S on your financials. | |
| 13 January 2007 | |
| Cafeteria deductions are NOT shown anywhere on the W-2. Usually the employee receives a statement showing the reconciliation. | |
| 14 January 2007 | |
| Cindola1-I would be more concerned about the reconciliation of the amounts rather than if the P & L amount is different from W-2s.
IRS for certain knows that differences do exist, and that wages show up in different places on the tax return - so if the wages amount doesn't exactly equal the financial statement amounts - it really isn't something to be concerned with - SO LONG AS THEY ARE RECONCILABLE. | |
| 15 January 2007 | |
| Many corporations file on a fiscal year rather than a calendar year. The payroll taxes are always on a calendar year. Also, for many companies, the wages are shown on different schedules in the financials. The important thing is that the wages shown on the 941's agree with the W-02 forms. | |
| January 15, 2007 | |
| Thanks for the responses everyone. I guess I just spaced out on this issue, as I forgot I already know that wages are sometimes spread out into different expense (Salaries & Wages) and Cost of Goods type accounts (Labor), etc. Everything does tie out, I just got thrown off with a pre-tax med insurance deduction that wasn't showing in wages at all scenario, etc. Thanks again for all the input. | |
| 15 January 2007 | |
| The IRS does not tie in the W-2 amounts to the actual tax return filings using their audit or CP 2000 programs. No need to worry. Like Uncle Sam said "SO LONG AS THEY ARE RECONCILABLE". | |
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