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W-2 wages Vs. Section 3401(a) wages


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9 replies to this topic

#1 flosfur

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Posted 11 November 2006 - 02:36 AM

An elementary question.

What's the difference between W-2 wages and Section 3401(a) wages?

Corbel prototype & volume submitter documents have 3 options to select from for defining "Compensation":
a) Wages, tips and other comp for Form W-2.
b) Section 3401(a) wages (wages for withholding purposes).
c) 415 Safe-harbor comp.

For the world me I cannot figure out the difference between option a & b!? Aren't the W-2 wages also the wages subject to withholding?

#2 Carol the Writer

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Posted 14 November 2006 - 09:29 AM

I thought, and I would appreciate any different points of view, that 3401(a) comp also includes comp received by a self-employed person. Such a person would not receive a W-2, but would have earnings that are subject to Social Security taxation and, therefore, would be eligible for pension benefits and contributions. Carol Caruthers, MSPA, EA

#3 Below Ground

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Posted 14 November 2006 - 09:47 AM

Carol, nearly all plans have additional language that is exclusive to proprietors and partners (typically earned income). As for the original question, I really don't know but I would suspect it involves impact of deferred or fringe pay. Sorry.
Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

ERPA, QPA, QKA

#4 AndyH

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Posted 14 November 2006 - 09:51 AM

I would guess that one difference might be taxable fringe not paid in cash, e.g. excess life insurance. You can't withhold directly from something like that. Just a guess, but clearly some taxable things can't have withholding apply.

#5 PLAN MAN

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Posted 14 November 2006 - 04:07 PM

AndyH is correct. A simplified explanation of the difference is 3401(a) wages are shown on your paycheck each pay period. This is the amount subject to tax withholding. W-2 wages are calculated for the year and include the additional amounts, if any, that do not have income tax withheld. If you ever have a difference between the total amount on your last paycheck for the year and your W-2, you'll see the difference.

#6 flosfur

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Posted 15 November 2006 - 12:07 AM

AndyH is correct. A simplified explanation of the difference is 3401(a) wages are shown on your paycheck each pay period. This is the amount subject to tax withholding. W-2 wages are calculated for the year and include the additional amounts, if any, that do not have income tax withheld. If you ever have a difference between the total amount on your last paycheck for the year and your W-2, you'll see the difference.


Huh!?
W-2 is just a form which among other items shows a) Income subject to Federal taxes [box 1], b) income subject to SS tax [box 3] and, c) income subject Medicare taxes [box 5] => using 2005 Form W-2.

As far as I know, income subject to Federal taxes shown in box 1 is what is commonly referred to as W-2 wages and that's what shows up line 7 of Form 1040.

So which item on (Form) W-2 is Section 3401(a) income?

#7 PLAN MAN

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Posted 15 November 2006 - 03:25 PM


AndyH is correct. A simplified explanation of the difference is 3401(a) wages are shown on your paycheck each pay period. This is the amount subject to tax withholding. W-2 wages are calculated for the year and include the additional amounts, if any, that do not have income tax withheld. If you ever have a difference between the total amount on your last paycheck for the year and your W-2, you'll see the difference.


Huh!?
W-2 is just a form which among other items shows a) Income subject to Federal taxes [box 1], b) income subject to SS tax [box 3] and, c) income subject Medicare taxes [box 5] => using 2005 Form W-2.

As far as I know, income subject to Federal taxes shown in box 1 is what is commonly referred to as W-2 wages and that's what shows up line 7 of Form 1040.

So which item on (Form) W-2 is Section 3401(a) income?


flosfur, your question does not address my response. There is a distinction between income subject to income tax withholding (3401(a) wages) and income included for income tax reporting (W-2 wages). All amounts included in 3401(a) wages would also be included in W-2 wages. However, certain income is exempt from income tax withholding and would not be included in 3401(a) wages, but would be included in W-2 wages (such as group term life insurance provided by the employer).

#8 AndyH

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Posted 16 November 2006 - 09:34 AM

PLAN MAN,

I don't think you'll get a thanks from flosfur, so I will say thank you. That is helpful.

#9 flosfur

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Posted 17 November 2006 - 01:51 AM

PLAN MAN,

I don't think you'll get a thanks from flosfur, so I will say thank you. That is helpful.

I didn't know one had to send in a Tip to responses on the Board, especailly when the responses are " I guess" this or I guess that!

Thank you Sires, one and all.

#10 Guest_named_Pensions in Paradise_*

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Posted 17 November 2006 - 05:18 PM

The ERISA Outline book has a nice chart comparing the three definitions of compensation.

P.S. - no thanks needed :shades:

Edited by Pensions in Paradise, 17 November 2006 - 05:19 PM.