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Financial Planning / Tax Strategies
|Subject: Re: IRA Deduction On Form 1040||Date: 9/21/2005 10:23 AM|
|Author: NaggingFool||Number: 80803 of 122629|
We don't have to report the 401K contributions as wages/salaries?
Yup. That's the whole point of a pre-tax retirement plan. The money you deducted from your paycheck and sent to a 401k is pre-tax. Your total income for tax purposes is after that.
There are some other pre-tax deductions too. If you have a medical/child care flexible savings account that comes out before taxes. There are also commuting allowances that some employers make available; in the case of my husband's work we pay for his subway passes with pre-tax dollars.
Take a close look at your paystub. See how there's one amount for total income, and another amount for Federal income? This sort of thing is what makes that difference.
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