Why your W-3 Box 1 wages are lower than your gross pay
The W-3 for your 7shifts Payroll account reports taxable wages, not gross pay, so W-3 Box 1 is lower than your payroll summary total when pre-tax benefit deductions apply. Pre-tax benefit deductions, like employee health insurance premiums, reduce the wages subject to federal income tax before the W-3 is calculated. This is expected.
How gross pay, W-3 Box 1, and net pay connect
Here's how the three totals relate:
- Gross pay: Everything employees earned before any deductions.
- W-3 Box 1 (taxable wages): Gross pay minus pre-tax benefit deductions. This is the taxable portion, so it's lower than gross pay whenever pre-tax benefit deductions apply.
- Net pay: What employees took home after taxes, insurance, and all other deductions. Net pay doesn't go on the W-3.
See the difference with an example
The difference between gross pay and W-3 Box 1 is exactly the amount of pre-tax benefit deductions. Nothing is missing from your W-3.
- Gross pay: $100,000
- Pre-tax benefit deductions: $4,000
- W-3 Box 1 taxable wages: $96,000
Net pay is lower than both totals because it reflects what employees received after all taxes and deductions. Keep net pay for your records. It doesn't go on the W-3.