What is w-2 salary

Sorry if this was asked before, cannot seem to find it

This is for 2021

W-2 box 1 100,000

W-2 box 5 90,000

W-2 box 14 - other - 2% SH 10,000 - this is the difference between box 1 and box 5

What is the 2021 salary for pension purposes?

Thank you

I think your assuming the box 14 amount is the difference between Box1 and Box 5 is flawed.   I think the better theory is that is just coincidence.   There are a lot of things that can cause a difference between Box1 and Box 5 that aren't reported on the W-2.  All Section 125 deductions come to mind as a common difference that aren't reported on the W-2 any place.  

Your plan document ought to define compensation.   If it says taxable income from the W-2 or something that means that I have always understood that to be Box1. 

It has always been my understanding Box 14 is just an informational box.  

Actually it is not. I provided rounded #'s.

The real numbers are too much of a coincidence and here they are:

W-2 box 1 76,827.21

W-2 box 5 66.999.93

W-2 box 14 - other - 2% SH 9,827.28 - this is the difference between box 1 and box 5

Box 1 is taxable wages.

Box 5 is wages subject to Medicare taxes.

It's possible than neither is the employees gross wages.

ESOP guy lists some good examples.

Might it also be possible that one or more of those boxes is completed incorrectly?  Ask the question to the person who completed the form.

Is this a situation where the S-corp. 2% shareholder medical deduction is included in Box 1 but not Box 5?  Typically I see this question when there are 401k deferrals showing up in Box 5 but not Box 1.

This sounds like there aren't deferrals though, so the Box 1 number is the "gross".

There is a deferral but it is roth so no adjustment.

I guess in this case I'd suggest Box 5.  I'd say add any 125 amounts to it, but if he's the owner then that's likely zero.  Your 9827 number sounds like the S-corp medical, in box 1 but not 5, leads you to the 76K number as "income".

My issue is I can't think of a fact pattern where a SH contribution would be in Box 1 much less in Box 1 and not 5.     

So either the W-2 has an error as suggested or the fact Box 14 is exactly the difference between Box 1 and Box 5 is a very odd coincidence.  

4 hours ago, Jakyasar said:

Sorry if this was asked before, cannot seem to find it

This is for 2021

W-2 box 1 100,000

W-2 box 5 90,000

W-2 box 14 - other - 2% SH 10,000 - this is the difference between box 1 and box 5

What is the 2021 salary for pension purposes?

Thank you

 

Here, Box 14 is the s-corp 2% shareholder health insurance premium.  It is subject to personal income tax but not Medicare withholding and therefore Box 1 is greater than box 5 by the amount of box 14.

So, it is box 5 for pensions?

4 minutes ago, Jakyasar said:

So, it is box 5 for pensions?

I believe its a fringe benefit and is therefore included, unless excluded by your document.

The document excludes nothing. So, box 1? Is that what you are saying?

Yes, in this instance.

Compensation for retirement plan purposes is Box 1 less S-corp medical or 66.999.93.

The s-corp medical is subject to income tax withholding but not FICA/Medicare, so it is excluded for retirement purposes.

Based on my research, I am beginning to think the suspect is box 5, could be wrong but some very reputable CPA's agree with 5.

On 4/4/2022 at 6:37 PM, Jakyasar said:

Based on my research, I am beginning to think the suspect is box 5, could be wrong but some very reputable CPA's agree with 5.

On 4/4/2022 at 4:20 PM, Dare Johnson said:

Compensation for retirement plan purposes is Box 1 less S-corp medical or 66.999.93.

The s-corp medical is subject to income tax withholding but not FICA/Medicare, so it is excluded for retirement purposes.

Some very reputable CPA's will also tell you that a FASB report accurately describes a pension plan's operations.

As this Plan's compensation reportedly does not exclude fringe benefits, then the s-corp medical is to be included.  Basic rule of thumb for w-2 comp, not including exclusions; add any pre-tax deferrals back to Box 1, then pick the biggest number on the form.

Overall, assuming this is a 5% owner, you won't go wrong if you mistakenly pick the lower comp, he'll have a lessor allocation and your testing will be conducted on a more stringent circumstance.  Sucks to be him though.