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11944: PA - State Wages Not Flowing to the PA Individual Return


Pennsylvania

On a Pennsylvania return, the PA wages from box 16 of the W2 are not flowing to the return. Why?

When your W2 PA wage information differs from federal wage information, the W2 Reconciliation worksheet, PAW2RWK, is used to reconcile Federal, Medicare, and PA wages to figure the amount of compensation to carry to the PA return.

When there is a difference between the PA State wages and the Federal and Medicare wages that cannot be explained from the data entered on the W2 box 16, the PA W2 Reconciliation Worksheet is required by PA. When needed, the software automatically generates this PAW2RWK worksheet. If this worksheet is produced, it is included in the e-filed return. If the amount entered on the W2 screen, box 16 is not being carried to the PA return, a note will produce indicating that:


Starting in Drake20

Starting in Drake20, the amount entered on screen W2, box 16 for PA wages will automatically be carried to Form PA40, line 1. To change this for a single return,

  1. Go to the PA > W2WK screen.
  2. Enter the W2 Number that is being overridden at the top left.
  3. Check the applicable override box(es):
    • Do not pull Drake's adjustment to line 9
    • Do not pull Drake's adjustment to line 17.
  4. Enter the adjustments you believe are necessary to more accurately report Pennsylvania source wages income.

Your election will override both the Drake Tax calculated amounts and the W2 box 16 amounts, allowing you to report the PA compensation amounts as needed.

In Drake19 and prior

To get the PA wage information to the return:

  • Confirm that the W2 is accurate. If it is not accurate, the W2 may need to be returned to the employer for correction.
  • Make entries on the W2WK screen to reconcile federal and Medicare wages to the state wages in box 16.
  • If you do not know the reason for the difference, you may want to ask the taxpayer for more information to help you reconcile the differences.

Note: If the amount carrying to the PA return is accurate, it is not necessary to clear the PA note.

    If no reconciliation worksheet is needed, and you want the software to only carry the amount entered in box 16 to PAW2S, part 1, you can disable the default software feature:

    • Globally: go to Setup > Options > States, select PA from the drop list, and select the option Pull State Wages from W-2 Box 16 ONLY (Individual package Only). This global setup will only pull the amount entered in box 16 on all PA individual returns to the PAW2S, part 1.
    • Per-return basis (Drake16 and prior only): go to States > PA > PRNT Print Options > Check the box to Only Use W-2 Box 16.


    If this option is enabled either globally or on the individual return, a note will produce cautioning you that the amount entered on the PA W2, box 16 is being carried to the PAW2S and PA40, line 1. You should review the return carefully to ensure that this is accurate.


    Additional Notes:

    • The software normally produces the PAW2RWK in situations that may result in an inquiry from PA to the taxpayer. If you disable the worksheet, and the taxpayer later gets a PA inquiry, you can turn the worksheet back again to complete it. You still must explain the differences.
    • You should review the PA-40 instructions, page 10 for details:

    "Submit an actual state copy or a legible photocopy of each state copy of Form W-2 (keep the original for your records) and a written explanation if: 

    1. The PA compensation you enter on Line 1a of your PA-40 is not the same as Box 16 on your Form W-2 (you believe that the PA compensation or withholding is incorrect). 
    2. Your employer gave you a handwritten Form W-2. 
    3. Your employer reported an incorrect amount on your Form W-2. You must also submit a written statement from your employer. 
    4. Your employer withheld PA income tax from your wages at a rate that is more than the 2015 tax rate of 3.07 percent. 
    5. You are a resident of a reciprocal compensation agreement state and your employer withheld PA income tax. 
    6. The Medicare wages in Box 5 on your Form W-2 are greater than your PA wages in Box 16. In this case, complete and include with your return the PA-40 W-2 Reconciliation Worksheet.
    7. You are a PA resident working in another state or country and did not have PA income tax withheld by your employer. 
    8. You have a distribution from a nonqualified deferred compensation plan included in Box 1 of your Form W-2. 
    9. Your Form W-2 shows income earned or tax withheld for another state."
    • The instructions to the PA-40 W-2 Reconciliation Worksheet state to use the worksheet when:
      1. Federal Form W-2 information is incomplete for determining the correct amount of Pennsylvania taxable compensation,
      2. Medicare wages are different from Pennsylvania wages and insufficient W-2 coding is present to explain the differences, or
      3. to show amounts of any previously taxed non-qualified deferred compensation.

    Examples include instances where the employer fails to show on the W-2 the amount of S corporation owner health benefits or personal use of company auto included in federal and Medicare wages that are not included in Pennsylvania wages.

    The W-2 RW is arranged in a three column format:

    • The first column is used to reconcile your federal wages to Medicare wages.
    • The second column is used to reconcile your federal wages to Pennsylvania wages, and
    • The third is to reconcile Medicare wages to Pennsylvania wages."

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