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 includes all taxable wages, while Box 3 includes wages subject to Social Security taxes. If Annabelle contributed to a pre-tax 401(k) plan, her taxable wages would be reduced, which would result in a lower amount in Box 1 compared to Box 3. This is because pre-tax contributions to a retirement plan are exempt from federal income tax and Social Security tax when they are made, but they are still subject to Medicare tax.

Annabelle Is Employed as an Administrator for GRM Industries