Should box 1 be higher than box 5 on a W2 or can they be the same or can box 5 be higher than box 1?

[IreneS]

First, an explanation of the boxes:

Box 1 reports your total taxable wages or salary for federal income tax purposes. The number includes your wages, salary, tips you reported, bonuses and other taxable compensation. For example, taxable fringe benefits such as group term life insurance will be included here.

However, Box 1 does not include any pre-tax benefits, such as savings contributions to a 401(k) plan, 403(b) plan or health insurance. The amount from Box 1 is reported on Line 7 of your Form 1040

Box 3 reports the total amount of your wages subject to Social Security tax.

Box 5 reports the amount of wages subject to the Medicare Tax. There is no maximum wage base for Medicare, so the amount showing in Box 5 may be larger than the amount showing in Box 1.

It is quite common for Boxes 3 and 5 to be higher than Box 1.  Here's  an example:

• Your wages for the year were $30,000.
• You had $5,500 taken from your pay to go into your employer's 401k retirement plan.

Box 1 would show $24,500 since $5,500 is not being taxed.  This will show up in Box 12 of your W-2.

Boxes 3 and 5 would show the full $30,000 since your total wages are subject to Social Security and Medicare Taxes.

Any combination is possible; however, boxes 3 and 5 are most often the same and box 1 can be lower than 3 and 5.

[m-ejean]

Okay so maybe you could help me more and you can have a better understanding. Let's say box 1 and box 3 is 4300 and box 5 is 15600 do those amounts make sense? I work for a restaurant making an hourly wage and tips. But box 7 for Social Security is 11300. I'm just confused because I have three other W-2s from restaurants but box 1 and 5 are identical meanwhile box 3 is different. It's just as one W2 box 1 and box 3 are identical and box 5 is extremely high.

[kkacp]

Question - My Box 1 is more than Box 3 and Box 5.  I have some Aflac that is taken out, both pre and post tax.  Does this seem correct?

Thank you!

[JohnW222]

Yes, this may be correct, based on what you indicate about the costs of Aflac insurance being taken out.

According to the instructions for Box 1 of Form W-2 on page 16 of the IRS' General Instructions for Forms W-2 and W-3, the "cost of accident and health insurance premiums for 2%-or-more shareholder-employees paid by an S corporation" can be included in box 1.

However, the instructions for Box 3 indicate that such costs can be included in Box 3 "only if not excludable under section 3121(a)(2)(B)." 

There is no instruction for the inclusion of such costs in Box 5.

So, to summarize:  the costs of this type of insurance, for this type of employee, can result in Box 1 being greater than Box 3 and Box 5 on a Form W-2. 

However… if this scenario doesn't seem to apply to you, it would probably be worthwhile to contact your employer.

[kkacp]

Thank you!

[Jessica-alicea]

If box 3 is higher than box 1, which do I put down as my total wages? I’m assuming box one since box 3 wasn’t taxed? Thank you!

[Jessica-alicea]

Hi! If box 3 is higher than box 1, which do I put down as my total wages? I’m assuming box one since box 3 wasn’t taxed? Thank you!

[BarbaraW22]

The amount reported in box 1 of your W-2 is your gross wages subject to Federal Income tax. The amount reported in box 3 is your gross wages subject to Social Security tax. 

In order to make sure your tax return is calculated correctly, you should enter all of the information on your W-2 into TurboTax exactly as it is shown on your W-2. 

You may be able to import your W-2 into TurboTax instead of manually entering the information. Please see the steps below:

1. Start by clicking on "Wages and Income" at the top of the screen.
2. Select "Work on my W-2 now" and "Continue." 
3. Enter your Employer's EIN and click "Continue"
4. If your W-2 can be imported, just enter the requested information
5. You can always manually enter your W-2 if it can't be imported

Here is a TurboTax article with more information.