If an employee has a tax deferred deduction (health insurance) then the total amount for this deduction is not included in Box 1 of the W2. It's my understanding that Box 3 of the W2 “Social Security Wages” and Box 5 “Medicare Wages” would include this amount.
Example
Total wages: $40,000
Tax deferred amount for health insurance: $2,000
Then -> Box 1: $38,000 - Box 3: $40,000 - Box $40,000
If an employer does report $38,000 (refer to example above) on all 3 boxes wouldn't they have to correct W2 because Social Security and Medicare is under paid by $153 ($2,000 * 7.65%) - Employee Responsibility and the employer match of $153 for a total of $306? ------ Or is there a particular circumstance in which the employer is allowed to report $38k vs $40k on Box 1, Box 3 and Box 5; although there was a $2,000 tax deferred deduction?
