Holistiplan's wages worksheet allows you to enter gross wages and elective pre-tax deferrals to arrive at taxable income.
For income tax calculation purposes, the only necessary value is taxable wages. But for planning, scenario building, and client conversation purposes, it can be helpful to illustrate the various pre-tax deferrals that clients make that transform gross wages into taxable wages. Holistiplan's wages worksheet does just that.
Users who choose to use a simple value of taxable wages applicable to the entire household can use the override box at the top of the worksheet, as indicated below. (Note that this box will be filled if the scenario is created by copying an uploaded return that contained any amount of taxable wages, as the 1040 does not break out wages by taxpayer.)
To free up the "per taxpayer" columns, delete any amount from the "Wages from 1040 Line 1" field. Remember that this column needs to be completely blank to open those columns; entering a "0" is not the same as deleting all data from that field.
Once the per taxpayer columns are editable, users can enter any appropriate data:
- Gross wages should reflect a taxpayer's gross salary before any pre-tax deferrals
- Pre-tax Savings Deferrals should reflect contributions to a traditional 401k, 403b, 457b, 401a, etc. While these deferrals are pre-tax, they are still subject to FICA and should be counted when determining Medicare-eligible wages for the purposes of the Additional Medicare Tax on wages in excess of $200,000/$250,000 (single/MFJ)
- Certain employee benefits may be pre-tax but are still subject to FICA, depending on how the taxpayer's workplace benefits plans are structured. Typically, these will be denoted on a client's paystub as being exempt from income tax but still subject to Medicare and Social Security tax withholding.
- The Pre-tax Deductions to Section 125 plans and other pre-tax deductions not subject to FICA field should reflect payroll deferrals to to things like Health Savings Accounts; Flexible Savings Accounts; Health, Dental, and Vision Insurance (provided that these benefits are offered via Section 125 Cafeteria Plans).
- Taxable Wages will be equal to Gross Wages less all pre-tax deductions.
The chart below may be a useful reference as a reminder of which taxes are applicable to various forms of wage income.
Users can enter other items that will be taxed as compensation but where it might be helpful to break them out from gross wages, including vesting Restricted Stock Units (RSUs), exercised Non-Qualified Stock Options (NQSOs), Bonuses, and Deferred Compensation income.
FICA
If users elect to break out wages per taxpayer, Holistiplan will calculate the estimated FICA amounts based on the wage inputs. FICA taxes are illustrated as a nested amount within Total Tax (Net of Refundable Credits), just below the Refundable Tax Credits section.
When expanded, the FICA sections will print on any printout of Scenario Analysis. To hide FICA from printing, simply collapse the Total Tax section by clicking the "-" sign next to Total Tax.
Some taxpayers - such as some members of the clergy - are required to pay income tax on wages but do not have any FICA withholding. In other cases, taxpayers may be paying into Medicare but not Social Security. Use the appropriate check boxes to indicate that the wages are exempt from one or both elements of FICA. (Note that we do not support situations where some income is subject to FICA but some is not.)
Withholding
Additionally, users can enter any amount of federal and/or state tax withholding in the Wages worksheet, and the information will be included in the Withholding section further down in Scenario Analysis:
