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Office of Financial Mgmt. - State Employee Payroll

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:

 

1. Use F8 key to form transfer to PR52.1 screen

2. Enter company number (900), employee number; applicable calendar year

3. Click Inquiry button at top left corner of screen. Click on the "Deductions" tab.  Find the larger of social security or Medicare taxable wages.

4. Click back to the "Wages" tab and add back the earnings taxable for income taxes but not social security/Medicare found on the wage tab as indicated below.  (Note: Use the "page down" key to scroll through all of the "Wage" tab information.)

 

Pay Summary Group Codes for section II above: 

A43   11M, M01  78G   REJ, REK 

5. Subtract the earnings found on the wage tab as indicated below.  (Note: Use the "page down" key to scroll through all of the "Wages" tab information.) 

 

Pay Summary Group Codes for section III above: 

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

6. Click "Deductions" tab; click the "Inquiry" button.  Deduction amounts and codes will appear.  Subtract the pretax deductions as indicated below.  (Note: Use the "page down" key to scroll through all of the "Deductions" tab information.)

 

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