Why will a W-2 with the amount in box 16 greater than box 1, be rejected in electronic filing?
-Dale
Dear Dale,
You’ve clicked the send button to submit your federal and state income tax returns, grateful for this yearly chore to be in your rearview mirror. A little while later, you get the message in your inbox. Just like Lucy snatches the football away from Charlie Brown as he is about to kick it, your plans to spend the afternoon binge-watching your favorite show disappear into the ether.
Unfortunately, there can be many reasons why your return was rejected for electronic filing (e-filing). In your question, you asked why a Form W-2 with an amount in Box 16 (state wages) greater than Box 1 (federal wages) was rejected for e-filing. It is not uncommon for a taxpayer’s state wages to be higher than their federal wages. This alone generally should not trigger a return to be rejected for e-filing purposes. For example, a taxpayer’s Pennsylvania state wages may be higher than their federal wages on Form W-2 because Pennsylvania does not allow a deduction from taxable wages for contributions made to a 401(k) retirement plan and the IRS does allow the deduction.
Whenever a return is rejected from e-filing, one or more rejection codes usually are listed. The first thing to do is find out what the rejection codes mean. Depending on your tax preparation software provider, the code may be embedded with a link you can click on to review instructions on if and how the error may be fixed. Another way to get information on a reject code is through an internet search.
If your return is being rejected for e-filing due to the information from your Form W-2, it is essential to check the accuracy of the federal Employer Identification Number (EIN) located in Box “b” and the state Employer’s Identification Number in Box 15. Returns can be rejected for e-filing when either of these numbers is incorrect. While you already have a copy of your Form W-2 out, it is a good idea to check if the rest of the entries are correct. Some tax preparation software allows certain Forms W-2 to be imported into the return. Although rare, W-2 data can become corrupted during the import process. It may be worth deleting the W-2 from the return and re-entering it, checking all entries one more time before resubmitting the return.
It is unclear whether your federal, state, or both returns were rejected. If the Pennsylvania (PA) state return was rejected, you might want to review Form PA-40 W-2 RW (Reconciliation Worksheet). When Pennsylvania wages are different from the federal taxable wages reported in Box 1 or the Medicare wages reported in Box 5, Form PA-40 W-2 RW generally is required to be included in the Pennsylvania state return filed.
If you cannot solve the case of the rejected return after doing some good old-fashioned Scooby Doo detective work, your best bet is to contact the customer support line of the software provider you are using. You can also contact either the IRS or State of PA Department of Revenue, depending on which return was rejected, but be prepared to wait on hold for a while. There is always the option of printing out your returns to mail them. Remember to sign, date, and mail them certified with return receipt request to confirm arrival at the tax agency. You may also need to attach Forms W-2 and 1099-R if you have them. Due to the pandemic, it may take several weeks to a couple of months for paper-filed returns to be processed, so making every effort possible to e-file the returns will result in a faster refund.
Wishing you e-filing success and many happy returns,
Jean