Questions: Problem 2-5 Salaries and Wages (LO 2.2) Kristen, a single taxpayer, receives two 2023 Form W-2s from the two employers she worked for during the year. One Form W-2 lists her wages in Boxes 1,3 , and 5 as 18,700. Her other employer's Form W-2 has 43,000 in Box 1 but 46,500 in both Box 3 and Box 5. Kristen participated in the second employer's 401 k plan. She also received health care from her second employer. Lastly, her second employer provided 30,000 of group term life insurance to Kristen. a. What amount should Kristen report as taxable wages in 2023? 61,700 b. What could explain the difference between Box 1 wages and Boxes 3 and 5 on her second employer's W-2?

To solve this problem, we need to determine the taxable wages Kristen should report and explain the differences in the amounts reported in different boxes on her W-2 forms.

Kristen's taxable wages are calculated by adding the amounts from Box 1 of both W-2 forms:

• From the first employer: $18,700
• From the second employer: $43,000

Total taxable wages = $18,700 + $43,000 = $61,700

Therefore, the amount Kristen should report as taxable wages in 2023 is $61,700.

The differences between Box 1 and Boxes 3 and 5 on Kristen's second employer's W-2 can be explained by her contributions to the 401(k) plan and possibly other pre-tax deductions.

• 401(k) Contributions: Contributions to a 401(k) plan are typically deducted from wages before federal income tax is calculated, which reduces the amount in Box 1 (taxable wages) but not Boxes 3 and 5 (Social Security and Medicare wages). The difference between Box 1 ($43,000) and Box 3/5 ($46,500) is $3,500, which likely represents her 401(k) contributions.

• Health Care and Group Term Life Insurance: These benefits are generally not included in taxable wages (Box 1) but may be included in Boxes 3 and 5 if they exceed certain thresholds. However, in this case, the primary difference is likely due to the 401(k) contributions.

In summary, Kristen contributed $3,500 toward her employer's 401(k) plan, which accounts for the difference between Box 1 and Boxes 3 and 5 on her second employer's W-2. The health care and group term life insurance benefits do not directly affect the difference between these boxes in this context.