Box 1 wages and box 16 wages do not match on w2 state return rejected, if that is correct how do I answer part 3 pa-40x

[PhyllisG · Accepted solution]

There are several reasons box 1 and box 16 do not match (e.g. pre-tax transportation benefits or wages from two states.) It is best to contact your employer to determine the reason the amounts differ.

After doing so, a simple reason can be entered in Part 111 of the PA-40X. You can enter the  explanation your employer may provide you.

[re2boys]

If you participate in a 401k retirement plan and are reporting PA income, box 1 and box 16 will never match.  Federal allows your 401k contributions (box 12, code "D")to be deducted from your gross wages.  PA does not.

[gmott18]

That box 1 amt would be lower only if it is a Traditional 401K, right, not for a Roth 401K, right?

[Cynthiad66]

Correct.  You receive a deduction on your income tax return because this contribution is not included in your wages in box 1 of your Form W-2. You pay income tax on the amount shown in box 1 on your Form W-2. Since the contribution to the 401(k) is not included in the box 1 amount, you do not pay tax on it.  @gmott18 

[Jacki0308]

so if I am a PA resident and contribute to a 401k (have an amount on w2, box 12, D), does that mean I have to put this amount in box 12, D or the 401k contritions in the PA additions to income box? 

[MarilynG1]

When you enter your W-2 in the Federal tax section, enter it as shown, with Code D and the amount in Box 12. 

Since Pennsylvania does not allow a deduction for 401K contributions, when you reach the screen in your state return displaying Compensation, if the amount is correct (matches your PA income on your W-2) you don't need to make any changes.  If it shows the lesser Federal amount, you can report your contribution amount as Additional Income.

Check this link from Commonwealth of Pennsylvania, under Income Items Always Taxable in PA.

@Jacki0308