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Excluded from federal taxable wages?

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Excluded from federal taxable wages?

Postby renaldo41 » Wed Nov 30, 2011 5:52 pm

I just started a new job a few months ago and I only get paid once a month. This month my 401k started taking out, but now that it started taking out my paycheck doesn't take out Federal taxes? My paystub sayd "Excluded from Federal Taxable Wages" in those exact words. What does this mean? I don't pay federal tax? Why? What does that mean when it comes time to file my taxes?
renaldo41
 
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Excluded from federal taxable wages?

Postby efran » Wed Nov 30, 2011 5:57 pm

My friend, what you are doing here is deffering your tax till you withdraw the 401K fund. Still you will be liable to pay the tax later on. Generally, the tax will be between 17-25% depending on the total amount. Thus, this is normal, however, if you are single and your income as employee went above 10k, you better ask the HR of your employer to start taking tax's.
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Excluded from federal taxable wages?

Postby goraidh61 » Wed Nov 30, 2011 6:02 pm

DEFERRED compensation 401K retirement plan not subject to income during the tax year of the contribution and will NOT be included in the Box 1 of your W-2 form that you will receive from your employer in the year 2012 and will NOT be subject to the federal income taxes until you reach retirement age and start taking distributions from the 401K amounts at that time in your life.
IF you happen to decide to take any of the amounts out early before you qualify for your retirement the taxable amounts will be subject to the FIT at your marginal tax rate plus a 10% early withdrawal penalty on the taxable distribution in the year of the distribution from the deferred compensation plan 401K account.
Hope that you find the above enclosed information useful. 10/29/2011
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Excluded from federal taxable wages?

Postby yehudi » Wed Nov 30, 2011 6:08 pm

it means that you have enrolled in a retirement program which deducts X $ which reduces your taxable gross by that amount, ie if you made $400/wk and $50 was deducted for your 401(K), instead of the income tax being calculated on $400, it is calculated on $350(less income tax withheld at this time)
your W2 will indicate to you the amount that is taxable, also it will report to you the amount that has been withheld for this 401(K)
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Excluded from federal taxable wages?

Postby crespin » Wed Nov 30, 2011 6:10 pm

it means that you have enrolled in a retirement program which deducts X $ which reduces your taxable gross by that amount, ie if you made $400/wk and $50 was deducted for your 401(K), instead of the income tax being calculated on $400, it is calculated on $350(less income tax withheld at this time)
your W2 will indicate to you the amount that is taxable, also it will report to you the amount that has been withheld for this 401(K)
Your 401k is pretax so it is not taxable income.
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