Today's question comes from J.M. in California. She asks, "On my annual W-2 Wage & Tax statement that I get from my employer, in Box # 1: Is this supposed to be the total (gross) amount of dollars I made in 2005? Or is it the amount of dollars minus the 401K and medical deductions?"
Box 1 of your Form W-2 Wage and Tax Statement reports your taxable income for federal income tax purposes. Boxes 3 and 5 reports your income for payroll tax purposes (Social Security and Medicare).
Generally, the amount shown in Box 1 is equal to the amount shown in Box 3 (Medicare wages) minus any 401k contributions (shown in Box 12 code "D") any any pre-tax insurance premiums shown in Box 14 (usually labelled "Health Insurance" or "Section 125 Cafeteria Plans" or similar phrases).
You can learn to read your Form W-2 like a tax professional with these easy-to-read articles:
- Form W-2 Basics
- Where to Send Form W-2
- Form W-2 Boxes 1-10
- Form W-2 Boxes 11-20
- Form W-2 Codes and Explanations for Box 12
Throughout the tax season I will be answering one tax question per day. Do you have a question? Visit the Ask a Tax Question page. Disagree with my answers? Post your comments in the Tax Forum.