flosfur Posted November 11, 2006 Share Posted November 11, 2006 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? Link to comment Share on other sites More sharing options...
Guest Carol the Writer Posted November 14, 2006 Share Posted November 14, 2006 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 Link to comment Share on other sites More sharing options...
Below Ground Posted November 14, 2006 Share Posted November 14, 2006 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? QPA, QKA Link to comment Share on other sites More sharing options...
AndyH Posted November 14, 2006 Share Posted November 14, 2006 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. Link to comment Share on other sites More sharing options...
PLAN MAN Posted November 14, 2006 Share Posted November 14, 2006 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. Link to comment Share on other sites More sharing options...
flosfur Posted November 15, 2006 Author Share Posted November 15, 2006 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? Link to comment Share on other sites More sharing options...
PLAN MAN Posted November 15, 2006 Share Posted November 15, 2006 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). Link to comment Share on other sites More sharing options...
AndyH Posted November 16, 2006 Share Posted November 16, 2006 PLAN MAN, I don't think you'll get a thanks from flosfur, so I will say thank you. That is helpful. Link to comment Share on other sites More sharing options...
flosfur Posted November 17, 2006 Author Share Posted November 17, 2006 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. Link to comment Share on other sites More sharing options...
Guest Pensions in Paradise Posted November 17, 2006 Share Posted November 17, 2006 The ERISA Outline book has a nice chart comparing the three definitions of compensation. P.S. - no thanks needed Link to comment Share on other sites More sharing options...
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