Report flags / W-2
NUMBERS“Medicare wages are lower than Social Security wages”
What this flag on a W-2 means, why it matters, and what to check.
What it means
Box 5 is lower than box 3.
Why it matters
Medicare has no wage limit, so box 5 is normally equal to or higher than box 3.
Ordinary explanations
- Rare special cases, such as some government employees exempt from Medicare.
What to check
Ask the applicant for the IRS wage and income transcript (free at irs.gov or with Form 4506-T), which lists W-2 amounts as the employer reported them.
A flag is a reason to verify with the source, not proof. Apply the same steps to every applicant.
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