Do I actually earn more than what shows on my W-2?
-
- Posts: 22
- Joined: Sun Jun 21, 2015 1:12 pm
Do I actually earn more than what shows on my W-2?
My employer deducts my health insurance premiums from my income before federal taxes. My HR dept rep said this means that I actually earn more income than what's on my W-2 at the end of the year since my W-2 shows income that's federal taxable (income left over after the insurance deductions).
Is this true? Have I actually been earning more per year than what my W-2 shows as wages earned?
I'm curious because if I ever go to another company, I'd like to be able to compare apples to apples when it comes to earnings. If so, I'm guessing I would need to take my total wages on the W-2 plus what I spent for the year on group health premiums to find what I truly earned in gross income...no?
Thanks in advance, Bogleheads!
Is this true? Have I actually been earning more per year than what my W-2 shows as wages earned?
I'm curious because if I ever go to another company, I'd like to be able to compare apples to apples when it comes to earnings. If so, I'm guessing I would need to take my total wages on the W-2 plus what I spent for the year on group health premiums to find what I truly earned in gross income...no?
Thanks in advance, Bogleheads!
Re: Do I actually earn more than what shows on my W-2?
Yes, it is true.
See below.
See below.
Last edited by retiredjg on Tue Aug 18, 2015 2:16 pm, edited 1 time in total.
Link to Asking Portfolio Questions
-
- Posts: 22
- Joined: Sun Jun 21, 2015 1:12 pm
Re: Do I actually earn more than what shows on my W-2?
I guess I just got a raise! All these years and I never understood that. Bogleheads for the win.
Re: Do I actually earn more than what shows on my W-2?
I'm re-thinking. I get a 1099 instead of a W-2. So I answered too quickly - my form is different from yours.
But you don't pay tax on your insurance premiums if they are taken from your salary, so I still think it is true, but I might be wrong and you might take that out of your salary while doing taxes.
But you don't pay tax on your insurance premiums if they are taken from your salary, so I still think it is true, but I might be wrong and you might take that out of your salary while doing taxes.
Link to Asking Portfolio Questions
-
- Posts: 22
- Joined: Sun Jun 21, 2015 1:12 pm
Re: Do I actually earn more than what shows on my W-2?
Hmm...okay. I'll post this evening what boxes on last year's W-2 were being used and how that lines up with total's that show on my last paycheck for the year.
Maybe ya'll could help me figure it out from there.
The way I'm looking at it, the total gross wages earned on the W-2 would likely only be the total earned after insurance premiums were pulled out. This way I get an accurate total amount of gross income that's still taxable.
Maybe ya'll could help me figure it out from there.
The way I'm looking at it, the total gross wages earned on the W-2 would likely only be the total earned after insurance premiums were pulled out. This way I get an accurate total amount of gross income that's still taxable.
Re: Do I actually earn more than what shows on my W-2?
I suspect that total wages is total wages, not taxable wages. But as I said, I'm not sure - I have not seen a W-2 in many years. On my taxes, I do have a step where I remove insurance premiums the taxable income.
Link to Asking Portfolio Questions
- Aptenodytes
- Posts: 3786
- Joined: Tue Feb 08, 2011 7:39 pm
Re: Do I actually earn more than what shows on my W-2?
My employer gives me a breakdown with each paycheck, so it is easy to compare what I get paid in real life to what my W-2 says. I also get a letter once a year telling me what my salary is.
For 2014 I can look at 4 different numbers:
1) The sum of the gross pay as listed on my pay stubs.
2) The W2 income total. This is quite a bit less than (1)
3) The W2 Social Security income total. This is equal to the SS income cap for 2014.
4) The W2 Medicare Wages total. This is between (1) and (2) and greater than (3).
W-2s are for determining tax liabilities; pay stubs are for tracking pay.
For 2014 I can look at 4 different numbers:
1) The sum of the gross pay as listed on my pay stubs.
2) The W2 income total. This is quite a bit less than (1)
3) The W2 Social Security income total. This is equal to the SS income cap for 2014.
4) The W2 Medicare Wages total. This is between (1) and (2) and greater than (3).
W-2s are for determining tax liabilities; pay stubs are for tracking pay.
Re: Do I actually earn more than what shows on my W-2?
Yes, you are correct. The amount in w2 box 1 will typically have your payroll deductions for health insurance and other tax deductible payroll deductions, including retirement contributions, already taken out. Box 3, Social Security wages, will also have your health insurance deductions taken out, but not your retirement contributions, so it will likely be more than box 1 unless you're over the income cap for social security. If you are over the cap then box 5, medicare wages, will be greater than box 3, otherwise they will be the same.pytheas2.0 wrote: The way I'm looking at it, the total gross wages earned on the W-2 would likely only be the total earned after insurance premiums were pulled out. This way I get an accurate total amount of gross income that's still taxable.
Re: Do I actually earn more than what shows on my W-2?
Had me curious, so I got a W-2 out. It lists gross pay... then less misc. non-taxable comp., less 457(b) (for me) contributions, and then less other Cafe 125... to then show reported W-2 wages.
So, your gross pay is listed on the earnings summary. Sorry, no raise for you.
So, your gross pay is listed on the earnings summary. Sorry, no raise for you.
Re: Do I actually earn more than what shows on my W-2?
You may have an end of year statement, otherwise collect your pay stubs, to get your total income.
The W=2 has to do with taxable income and has retirement contributions taken out as well as insurance, HSA, Flex amounts, etc. SS income has most of these, except retirement contributions, taken out. The W-2 also has the important tax information of state and federal taxes withheld. I don't see gross income on those I see, although the box labeled "other" could have almost anything.
The W=2 has to do with taxable income and has retirement contributions taken out as well as insurance, HSA, Flex amounts, etc. SS income has most of these, except retirement contributions, taken out. The W-2 also has the important tax information of state and federal taxes withheld. I don't see gross income on those I see, although the box labeled "other" could have almost anything.
Re: Do I actually earn more than what shows on my W-2?
One thing that will not be easily seen is any employer contribution to one's HSA plan. Another bit of compensation not on a W-2 is any employer match to a 401(k) or 403(b) plan.
- Artsdoctor
- Posts: 6017
- Joined: Thu Jun 28, 2012 3:09 pm
- Location: Los Angeles, CA
Re: Do I actually earn more than what shows on my W-2?
Pytheas,
I don't think you actually got a raise and I think your HR rep is not very knowledgeable.
If you're in a small business (under 250 employees) and your employer pays for your insurance, it's probably not going to show up on your W2 quite yet, although it probably will soon. However, this amount is not taxable (federal, state, FICA, Medicare). This is a called benefit.
If you're paying all or part of your premiums in pre-tax dollars, you may be more likely to see it on your W2 (Other: DD), but that amount will still not be subject to any income or payroll taxes. You're paying for it, but it's just not taxed.
If your employer is paying for you and you kick in the premiums for family members, the added premiums for family member are still be pre-tax, but you'll be paying for it.
Health insurance for employees, certain dental benefits, may not show up on your W2 and your employer match, HSA contribution, disability insurance, sometimes life insurance, will not show up. Those are benefits and not earned income, in most situations.
I don't think you actually got a raise and I think your HR rep is not very knowledgeable.
If you're in a small business (under 250 employees) and your employer pays for your insurance, it's probably not going to show up on your W2 quite yet, although it probably will soon. However, this amount is not taxable (federal, state, FICA, Medicare). This is a called benefit.
If you're paying all or part of your premiums in pre-tax dollars, you may be more likely to see it on your W2 (Other: DD), but that amount will still not be subject to any income or payroll taxes. You're paying for it, but it's just not taxed.
If your employer is paying for you and you kick in the premiums for family members, the added premiums for family member are still be pre-tax, but you'll be paying for it.
Health insurance for employees, certain dental benefits, may not show up on your W2 and your employer match, HSA contribution, disability insurance, sometimes life insurance, will not show up. Those are benefits and not earned income, in most situations.
Re: Do I actually earn more than what shows on my W-2?
Box 1 is income that is potentially taxable (not the same as taxable income on a form 1040). This does not include things like traditional 401k contributions, cafeteria plans, medical insurance, dependent care plans, etc. which are deducted pre-tax. If you add back in all those thing you'll arrive at your gross pay, most of the time.
The easiest way to figure this out would be to look at your last pay stub for 2014. It will have the total gross pay, total net pay, total pre-tax deductions, etc. Adding those numbers in various combinations should bring you to boxes 1, 3, and 5 on the W-2.
Related to this: Do you not know what your yearly income is? Have you never seen your W-2 and thought, "Hey, why doesn't that number match my salary?"
Semi-related: If you are thinking of moving to a different company you want to compare total compensation package, not just salary/pay rate. Things like retirement plan matching, pensions (if they still exist), bonuses, company paid insurance, tuition reimbursement, paid days off, etc.
The easiest way to figure this out would be to look at your last pay stub for 2014. It will have the total gross pay, total net pay, total pre-tax deductions, etc. Adding those numbers in various combinations should bring you to boxes 1, 3, and 5 on the W-2.
Related to this: Do you not know what your yearly income is? Have you never seen your W-2 and thought, "Hey, why doesn't that number match my salary?"
Semi-related: If you are thinking of moving to a different company you want to compare total compensation package, not just salary/pay rate. Things like retirement plan matching, pensions (if they still exist), bonuses, company paid insurance, tuition reimbursement, paid days off, etc.
-
- Posts: 22
- Joined: Sun Jun 21, 2015 1:12 pm
Re: Do I actually earn more than what shows on my W-2?
Thank you everyone for all the great advise! I pulled out 2014's last paycheck stub and 2014's W-2 and made some comparisons.
Box 1 on the w2 showed an amount = to my paycheck's YTD Gross Earnings minus my paycheck's YTD deductions.
So there you have it. No raise for me However, I'm better for it with a much better understanding of my taxes...and how great it is to have the premiums deducted from my earnings before taxes.
I do have a follow up question:
what do I report as my gross earnings whenever I'm asked to report income for whatever various reasons if there's no specification of 'taxable gross income' (for school, scholarships, etc)? I'm not meaning in conversation, but for various forms I fill out for me, the kids, credit applications, etc. Is it legal (moral?) to report the W-1's lower 'taxable' income...or should I be reporting the entire total income it shows I earned on my paycheck? I don't have a specific example, but I am curious as I have been asked for whatever reasons over the years.
Thanks again, Bogleheads!
Box 1 on the w2 showed an amount = to my paycheck's YTD Gross Earnings minus my paycheck's YTD deductions.
So there you have it. No raise for me However, I'm better for it with a much better understanding of my taxes...and how great it is to have the premiums deducted from my earnings before taxes.
I do have a follow up question:
what do I report as my gross earnings whenever I'm asked to report income for whatever various reasons if there's no specification of 'taxable gross income' (for school, scholarships, etc)? I'm not meaning in conversation, but for various forms I fill out for me, the kids, credit applications, etc. Is it legal (moral?) to report the W-1's lower 'taxable' income...or should I be reporting the entire total income it shows I earned on my paycheck? I don't have a specific example, but I am curious as I have been asked for whatever reasons over the years.
Thanks again, Bogleheads!
- Uncle Pennybags
- Posts: 1835
- Joined: Tue Oct 28, 2014 2:05 am
Re: Do I actually earn more than what shows on my W-2?
The US Treasury will get theirs eventually.livesoft wrote:Another bit of compensation not on a W-2 is any employer match to a 401(k) or 403(b) plan.
Re: Do I actually earn more than what shows on my W-2?
Just curious if the HR representative was thinking about the employer contribution to the health insurance premium, not the employee contribution to the health insurance premium. I see this sort of thinking from time to time as a state of CA employee. There's a mindset that the lower monthly salary of a public employee is made up by having higher than average monthly benefits.
So this mindset sees the "total salary" as the gross salary + the employer-paid benefits. For example, if I were to add up the employer contributions for retirement, health insurance, dental insurance, vision insurance, long-term disability insurance and life insurance, I would be making 33% "more" each month.
Of course, unless one becomes an independent contractor, many employers have some level of benefits. But if you were to go to another company, you would want to compare not only the salary offer, but also the benefits package.
So this mindset sees the "total salary" as the gross salary + the employer-paid benefits. For example, if I were to add up the employer contributions for retirement, health insurance, dental insurance, vision insurance, long-term disability insurance and life insurance, I would be making 33% "more" each month.
Of course, unless one becomes an independent contractor, many employers have some level of benefits. But if you were to go to another company, you would want to compare not only the salary offer, but also the benefits package.
Re: Do I actually earn more than what shows on my W-2?
If it asks for gross income, then you report the gross income as it is shown on your pay stub. If it asks for adjusted gross income (AGI), then you pull out last year's tax return and enter your tax return AGI. Very rarely have I seen forms asking for taxable gross. If I'm filling out the form in person and it's unclear what they want, I ask.pytheas2.0 wrote:what do I report as my gross earnings whenever I'm asked to report income for whatever various reasons if there's no specification of 'taxable gross income' (for school, scholarships, etc)? I'm not meaning in conversation, but for various forms I fill out for me, the kids, credit applications, etc. Is it legal (moral?) to report the W-1's lower 'taxable' income...or should I be reporting the entire total income it shows I earned on my paycheck? I don't have a specific example, but I am curious as I have been asked for whatever reasons over the years.
As for how accurate you need to be, that depends on the form. For some forms like a FAFSA, you need to match your tax returns for the indicated years. For a credit application, usually it asks if your income falls into a set of ranges, and you should choose the range that most closely matches your actual income. You don't want to overstate or understate your income on financial forms. Falling back to the previous year's tax return info is usually a pretty safe option for financial forms, unless they specifically ask for an estimate of your current year's income.
On the other hand, if Junior's baseball league wants to know your income, you can tell them it's none of their business.
- Uncle Pennybags
- Posts: 1835
- Joined: Tue Oct 28, 2014 2:05 am
Re: Do I actually earn more than what shows on my W-2?
Sounds like the old Telephone Company. Benefits easily made up 1/3 of the compensation. It was easy to ignore the benefit's worth until the tax man started taking a cut, in cash, of said benefits.Mudpuppy wrote:So this mindset sees the "total salary" as the gross salary + the employer-paid benefits. For example, if I were to add up the employer contributions for retirement, health insurance, dental insurance, vision insurance, long-term disability insurance and life insurance, I would be making 33% "more" each month.
Unless one is Donald Trump then the answer is TEN BILLION DOLLARS.Mudpuppy wrote:On the other hand, if Junior's baseball league wants to know your income, you can tell them it's none of their business.
Re: Do I actually earn more than what shows on my W-2?
My employer provides a "Verification of Employment" letter, which I have used when applying for loans and rental apartments. The letter lists my official salary; with pre-tax health insurance and HSA contributions, it is higher than the gross pay on my W-2. (The official salary can be inferred from my pay stub, which shows the pre-tax deductions, and also lists which items of pay are not part of my regular salary, such as bonuses.)Mudpuppy wrote:If it asks for gross income, then you report the gross income as it is shown on your pay stub. If it asks for adjusted gross income (AGI), then you pull out last year's tax return and enter your tax return AGI. Very rarely have I seen forms asking for taxable gross. If I'm filling out the form in person and it's unclear what they want, I ask.pytheas2.0 wrote:what do I report as my gross earnings whenever I'm asked to report income for whatever various reasons if there's no specification of 'taxable gross income' (for school, scholarships, etc)? I'm not meaning in conversation, but for various forms I fill out for me, the kids, credit applications, etc. Is it legal (moral?) to report the W-1's lower 'taxable' income...or should I be reporting the entire total income it shows I earned on my paycheck? I don't have a specific example, but I am curious as I have been asked for whatever reasons over the years.
Re: Do I actually earn more than what shows on my W-2?
Yes, it is true.
2014 W-2:
Box 1 = Gross wage - (employee 401k contributions + employee medical premium + employee dental premium)
Box 3 = Different for different people depending upon whether your income is above or below the SS limit, so we will leave it out
Box 5 = Gross wage - (employee medical premium + employee dental premium)
Gross wage = what my employer tells me my total salary is AND the total of my regular pay on my paycheck.
2014 W-2:
Box 1 = Gross wage - (employee 401k contributions + employee medical premium + employee dental premium)
Box 3 = Different for different people depending upon whether your income is above or below the SS limit, so we will leave it out
Box 5 = Gross wage - (employee medical premium + employee dental premium)
Gross wage = what my employer tells me my total salary is AND the total of my regular pay on my paycheck.