Understanding Your W-2 - Taxable Income Is Not... | Gather

It's tax time!!

I'm not a tax pro but I do the payroll for approximately 3,500 employees in the healthcare industry.?? Approximately 500 of those employees call me up every year to tell me that I figured their W-2's wrong.

Today's call was from a woman who looked at her final pay stub in December and was very confused about why she couldn't find her gross income amount anywhere on her W-2. I must have done something wrong.

Nope.? Here's how it works:

The amount reported in box 1 of your W-2 is your TAXABLE INCOME for Federal purposes.

To figure out where that number comes from, you would use the Gross Income amount from your final pay stub and subtract out any health insurance, dental insurance, vision insurance, HSA's, Flex Spend accounts and 401k contributions.? (These are all pre-tax deductions for federal purposes.)

The amounts reported in box 3 is your TAXABLE SOCIAL SECURITY WAGES and in box 5 is your TAXABLE MEDICARE WAGES.

To figure out where those numbers come from, you would use the Gross Income amount from your final pay stub and subtract out any health insurance, dental insurance, vision insurance, HSA's and Flex Spend Accounts.(401k is NOT a pre-tax deduction for social security and medicare purposes.)

You wouldn't believe how many people call me up and tell me that their accountant said that it must be wrong because the amount on the W-2 doesn't match the gross income amount on their final pay stub.

My advice to them:? Get a new accountant ASAP!!

And yes, I really have said that to a few people in case you were wondering!!

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