My medicare wages are greater than my PA state wages, is that a problem and should i make a statement?

[HelenC12]

No, that is not a problem. The most common reason is due to 401(k) contributions (W2, Box 12, Code D) or other pre-tax retirement plan contributions. They are subject to medicare tax but not to federal or state income tax.

Additional information: IRS Topic No. 751 Social Security and Medicare Withholding Rates

[egoralczyk]

Looks like that is not a problem. Not sure why turbotax expects me to send in printed W2 with statement to Pa.

[LeonardS]

The fact that your medicare wages are higher than your wages is should not be a reason why you have to send a printed copy of your W-2 to PA.  Did you receive a reason why you need to send a copy of your W-2 to PA?.  The most common reason why medicare wages are higher is due to 401(k) contributions (W2, Box 12, Code D) or other pre-tax retirement plan contributions. They are subject to medicare tax but not to federal or state income tax.

[buddykat]

Except in Pennsylvania (the state the question was asking about), 401k contributions and other retirement contributions are *not* deductible.  On the flip side, they are also not taxed when they are withdrawn if they were earned while you lived in PA.

[goodaact]

Do you know why an employer would calculate the PA withholding amount from the wages(box1 on w2) which excludes the 401k contributions and not the state wages (box 16)?

[DianeW777]

It sounds like it is an error on the part of your employer's payroll department.  The state withholding should definitely be determined based on your state wages as opposed to the federal wages.

Contact your payroll department and ask them to make the change so that you don't owe tax each year on this difference due to the 401(k) contributions. I'm sure it's just a click of the mouse to make the change in their systems.

[dwilson16]

I had the same question - TurboTax does not have the W2 reconciliation form needed to resolve the issue. Customer can efile the federal return but must mail in the state return with the W2

[Cynthiad66]

Since PA does not have a deduction for the 401K, seems your employer may need to issue corrected W-2 to show the PA income including any of those type contributions that may have reduced the PA income.

 Pennsylvania is one of the few states that does not follow the federal rules on 401(k) contributions. PA does NOT exclude 401(k) contributions from a taxpayers income - thus, making contributions taxable.

PA Rules Regarding Retirement Accounts

[Jim R PA]

Most people replying assume the difference between Medicare wages and PA State wages is due to erroneously deducting 401(k) contributions.  In my case, at least, it is due to (correctly, I believe) adding "Imputed Income" ("Taxable cost of group-term life insurance over $50,000") to Medicare wages but not State wages.

[DaveF1006]

Yes. According to this PA link taxable Group term life insurance is never taxable for Pennsylvania personal income tax purposes, regardless of the amount. 

[RBJ54]

I think Jim R PA specks of what I am seeing on my wife's W-2. Her PA wages are the same as her Total Gross pay for 2020 from her last pay stub but Social Security & Medicare wages are $310.00 higher.  Is there an Instruction from the State or Feds that explains these variations in taxable wages   

[ErnieS0]

@RBJ54 Your wife's payroll or HR department would be the best person to explain the difference. Without seeing all the boxes on the W-2, everything is just a just.

Pennsylvania does give a list of examples of items that are not subject to the personal income tax?

• Social Security benefits and/or Railroad Retirement benefits
• Commonly recognized pension, old age, or retirement benefits paid after becoming eligible to retire, and retiring
• United Mine Workers Pension
• Military pension benefits
• Civil Service Annuity
• Unemployment compensation and public assistance
• Payments received under workers' compensation acts, occupational disease acts, or similar legislation; including Heart and Lung Pension
• Payments for injuries received while working, and damages received, whether by suit or otherwise, for personal injuries
• Sick pay and disability benefits, including payments by third party insurers for sickness or disability (does not include amounts paid as sick leave)
• NOTE: If your employer includes your payments for sickness, disability, and/or on-the-job injuries in box 16 of your Form W-2, provide a statement from your employer verifying the amount of these payments.
• Employer-paid group term life insurance premiums
• Damage awards and settlements from physical injury or sickness such as pain and suffering or emotional distress
• Child support
• Alimony
• Inheritances, death benefits, and income in respect of a decedent (IRD) as defined for federal income tax purposes
• Active-duty pay received as a member of the U.S. Armed Forces from the U.S. government for service outside Pennsylvania (see page specific instructions in the PA-40 IN, Instruction Booklet)
• Awards and gifts made from detached or disinterested generosity
• Personal use of an employer’s owned or leased property and/or services, at no cost or at a reduced cost
• Federally taxable punitive damages received for personal physical injury or physical sickness, whether received by suit or by settlement
• Income from contracts of insurance for long-term care that do not have accumulated refundable

[Jean01]

Your medicare wages could be higher that your PA  wages if Box 12 shows imputed income for Life insurance over 50K or shown as code C.  PA does not tax this imputed income.  However, PA does tax 401K contributions.  They are not taxed in PA when they are pulled out, unlike the Federal.  I'm not sure why everyone thinks that 401K contributions reduce taxable PA wages on your W-2.  It is simply not true.  PA is rather unique in this aspect.

In other words.....

PA does not tax Box 12 code C wages

401K contributions are not pre-tax in PA, unlike most other states.  When 401K contributions are pulled out at a later date, they are not taxed because the tax has already been withheld.

Medicare and PA wages should be the same other than a deduction for imputed income (code C) from PA.

PA state and PA local wages should agree on the W-2.

[Sarah531]

Is this new? I have been doing our taxes with Turbo Tax for several years and don’t recall being asked if the Medicare income was higher.