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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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My federal wages (box 1 on my W2) are smaller than my NJ state

Resolved Question:

My federal wages (box 1 on my W2) are smaller than my NJ state wages (box 16 on my W2). This matches my last pay stub, but my tax prep software is reading this as an error and their "tax expert" support told me that my W2 must have an error in it. Not sure if I need to get a new W2 or if my preparer is wrong.
Submitted: 7 years ago.
Category: Tax
Expert:  Ed Johnson replied 7 years ago.



This would be correct. The W-2 is not wrong.


NJ does not allow certain pre-tax deductions, which the IRS does.


Take 401(k)'s for example: 401(kl) contributions are pre-tax and reduce the number reported in block 1 for fedearl tax purposes. However, NJ adds the 401(k) contributions back in. You pay tax on 401(k) contributions in NJ, because NJ considers them after tax.


It is often the case with my own and my clients, NJ W-2's, that our state taxable income is higher than the FED becasue NJ does not allow certain employer paid pre-tax benefits to be pre-tax.



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