Annabelle is employed as an administrator for GRM Industries. She noticed that her Box 1 and Box 3 amounts on her W-2 were different. What is a reason why the amounts in boxes 1 and 3 would be different?

Question

Annabelle is employed as an administrator for GRM Industries. She noticed that her Box 1 and Box 3 amounts on her W-2 were different.  What is a reason why the amounts in boxes 1 and 3 would be different?

Quizplus · Accepted Answer

Box 1 represents total taxable wages for federal income tax withholding purposes, while Box 3 represents wages subject to Social Security taxes. Contributions to a pre-tax 401(k) plan reduce taxable income for income tax purposes but are still subject to Social Security taxes, causing the amounts in Box 1 and Box 3 to be different.

Annabelle Is Employed as an Administrator for GRM Industries