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William Perez

Reading Form W-2: Tax Question of the Day

By February 6, 2006

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Throughout the tax season I will be answering one tax question per day.

Today's question comes from M. Blauvelt in Virginia. She asks, "My husband is a graduate student, who works a part-time work study job. On his 2005 W2, Box 1 (wages and tips) is higher than Boxes 3 & 5. On the TaxCut software, it came up as a red flag for auditors. Can you offer an insight to this?"

Form W-2 reports wages and other tax information related to your job. The amount shown in box 1 represents your taxable income for income tax purposes. Boxes 3 and 5 represents your taxable income for Social Security (Box 3) and Medicare (Box 5) purposes. It is OK if this amounts are different.

The amounts can be different for any number of reasons. For most people, Box 1 wages will be lower than the amounts in Boxes 3 and 5 if you contributed to a retirement plan, such as a 401(k) or other group retirement plan. Retirement contributions should be shown in Box 12 with a letter code, such as code "D" for 401k contributions.

The alert in TaxCut could mean several things. First, it's an alert to review your W2 data entry to make sure all information was entered. If you forgot to type in the information for Box 12, go back and type that in. That will probably remove the red flag when you do the final review in TaxCut.

More information:

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.

March 19, 2008 at 8:59 pm
(1) Jessica says:

Okay so i’m 17 years old almost 18 and i had a job but quit but i got this w2 tax thing in the mail and i dont know if i can file taxes?

March 20, 2008 at 3:17 pm
(2) William Perez says:

Jessica, look in box 2 of your W2 and see if there’s any dollar amount there. This figure represents how much money was taken out of your paycheck to cover taxes. You will want to file a tax return if you have withholding so you can get a refund.

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