On your W2, why are there two different incomes listed?

Some of the benefits you get are not subject to income tax, but they are subject to FICA and Medicare Tax. The government makes them not subject to income tax as a slight incentive for the employer to offer them. But they’re still part of your wages so they’re subject to FICA and Medicare.

So..which one is my real income?

The social security figure represents your paid compensation. There can be other benefits that may not be included in that figure.

I see…sort of. Thanks.

The intructions for your 1040, 1040A or 1040EZ should tell you which box to use as your income.

I’ve filed my own taxes in the past. I just didn’t quite understand why the Federal was taxed on one income, and SS was taxed on a different income.

Say your employer offers a 401K and you elect to have $4000 go into it for the year. That $4000 is not subject to income tax, so it’s not included in the box 1. Your employer is paying it to you, it’s still your money as part of your wage package, so it’s subject to FICA and Med, and so it’s included in those boxes and you pay FICA and Med on it.

Ah…that’s where my thoughts were heading @Adirondackwannabe! You cleared it right up. I got it now. Thanks~

There could be another reason. In 2010 the Social Security tax withheld from employees was 6.2% of the first $106,800 of taxable earnings. Earnings in excess of $106,800 are not subject to the Social Security tax. However the entire amount of each employees’ taxable earnings is subject to the Medicare tax of 1.45%. ( FICA-HI)
That is quite a benefit for those people earning significantly more than $106,800 – and one of the tax breaks targeted to be dropped to help fund Social Security. Unfortunately since most of the politicians fall into that category so it is unlikely that benefit will be dropped. They are talking about moving the limit to $200k or $250k.

Social Security is an insurance program to which we are all compelled to subscribe and from which we are all entitled to receive benefits. We happen to pay the premiums for it through payroll deductions that seem similar to taxes.
The method for determining your Social Security premium involves an income calculation that is independent of the income calculation need for your federal taxes and done by different rules. The cap on income used for determining Social Security income does indeed look like a tax break for wealthy and whatever you call it is arguably inappropriate.
The fact that they appear on the same form and start with the same numbers can be confusing.