State Employee Payroll - W-2s

How are W-2 taxable wages calculated for Federal (box 1), State (box 16), and Local (box 18)?

I. Preparation:

Begin with social security/Medicare taxable wages, whichever is greater, shown in box 3 or 5 of the W-2.

 

II. Add back wages that were exempt from social security and Medicare but not from income tax. These amounts are found in the "Earnings" section of your earnings statement. However, they will only be found on the earnings statements for the periods in which you received these types of wages.  Therefore, you may need to review all earnings statements for the applicable calendar year to find these amounts:

1. S/L payoff - disability retirement

2. Military leave payments or adjustments marked "Med/SS Non-Tax" 

3. Non-taxable grievance/settlement payments*

4. Retirement contribution earned through county - Judges only

 

* Backpay is reported as taxable compensation, included in social security and Medicare (FICA) wages and subject to income tax and FICA withholding. Liquidated damages, interest and legal fees are reported as taxable compensation but not included in FICA wages and not subject to FICA withholding. Compensatory damages are not reported as taxable income, included in FICA wages or subject to income tax or FICA withholding.

 

III. Reduce Amount by Additional Non-Taxable Wages.

These amounts are also found in the "Earnings" section of your earnings statement for the periods in which you received these types of wages.  Therefore, you may need to review all earnings statements for the applicable calendar year to find these amounts:

  1. Beneficiary payments at employee's death - current year
  2. FICA Supplement - Judges

 

IV. Reduce Amount by Additional Pre-Tax Deductions.

     These amounts are found in the "Employee Pre-Tax Deductions" section of the statement.

  1. Employee paid traditional 401k and 457 contributions
  2. Tax Deferred Payments - TDP
  3. Pre-tax employee retirement contributions

 

V.  Net amount of calculation should equal taxable wages for Federal (box 1), State (box 16) and Local (box 18) on the W-2. 

 

NOTE: If state or local taxable wages do not equal federal taxable, it may be because not all wages were subject to that particular tax authority during the year due to a change in work site or residence.

 

VI. HR Offices Only - HR personnel that have appropriate security can access this information on the PR52.1-Payroll History - Year to Date by following the procedure below:

 

Open the PR52.1 form in HRMN for the applicable employee and year.  Find the larger of the Social Security or Medicare wages on the "Deductions" tab.  Add in earnings found on the "Wages" tab as indicated below (these earnings are taxable for income tax purposes but were not included in Social Security or Medicare taxable wages).

 

Pay Summary Group Codes for section II above: 

A43   11M, M01  78G   REJ, REK 

Subtract out the earnings found on the "Wages" tab as indicated below (these earnings were taxable for Social Security and Medicare, but are not taxable for income tax purposes).

 

Pay Summary Group Codes for section III above: 

A35, 35C, A45, A55, 95D, A95, 3AD, 33A, 43S, 53C 
FIC 

Transfer to the PR52.1 "Deductions" tab.  Subtract the pretax deductions found on the "Deductions" tab as indicated below.

 

Deduction Codes for section IV above: 

DC03, WDC0-WDC3, WDK0, WDK1, WDZ0-WDZ2, WJZ0, WJZ1, Corresponding adjustment codes that begin with "V" 

SV01-SV58 
WR08-WR30 and corresponding adjustment codes V141-V151