W-2 Filing Tips # 5 - Reporting of Wage Data:
- All taxable, noncash, and nonpayroll wages, compensation and other benefits should be included on the Form W-2.
- All fringe benefits and nonpayroll compensation amounts should be clearly documented for the employee.
- Dependent care assistance, nontaxable portion should be included in box 10.
- Dependent care assistance, excess taxable portion included in boxes 1, 3, 5, and 10.
- Nonaccountable plan business expenses should be included in boxes 1, 3 and 5.
- Taxable cost of employer-paid group-term life insurance coverage over $ 50,000 should be included in boxes 1,3,5 and 12 with code C.
- Section 401(k) pretax employee contributions should be included in boxes 3, 5, 12-code D and box 13 marked.
- Designated Roth contributions to a Section 401(k), 403(b) or 457 plan should be in boxes 1, 3, 5, and 12-code AA, BB, or EE.
- SEP employee contributions should be in boxes 3, 5, 12-code F, and box 13 marked.
- Taxable fringe benefits not included in boxes 10 or 12 (e.g. personal use of company auto) should be included in boxes 1, 3, 5 and box 14 at the employer’s option.
- If the annual lease value of a company auto is included in the employee’s income, the value should also be reported in either box 14 or on a separate statement.
- Deceased worker’s wages paid prior to death should be in boxes 1, 3, and 5. Deceased worker’s wages paid after death but in the same year as death should be in boxes 3 and 5 on Form 1099-Misc.
- Reimbursed nontaxable moving expenses paid directly to employee should be included in box 12-code P. Reimbursed taxable moving expenses included in boxes 1, 3, and 5.
- Allocated tips included in box 8 only.
- Tips reported by the employee included in boxes 1, 5, and 7.
- Uncollected Social Security tax on tips should be in box 12 with Code A.
- Uncollected Medicare tax on tips should be in box 12 with Code B.
- Accident and health insurance premiums for greater than 2% shareholder-employees paid by an S-Corp. should be included in box 1. Maybe in box 3 and 5 if exclusion under IRC Sec. 3121(a)(2)(B) is not met. (Discuss with your tax professional)
- Employee business expenses with per diem allowances in excess of IRS federal rate allowances should include excess in boxes 1, 3, and 5 and the allowed government rate in box 12 with code L.
- Nontaxable sick pay paid by a third-party insurer should be included in box 12 with code J.
- All employer contributions to an employee’s Archer MSA should be included in box 12 with code R. Employer contributions to an employee’s (HSA) should be in box 12 with Code W.
- Employer payments for qualified adoption expenses under an adoption assistance plan should be in box 12 with code T.
- All current year deferrals plus any earnings on current and prior year deferrals under a Section 409A nonqualified deferred compensation plan should be labeled with Code Y. Deferred compensation that does not meet the requirements and is currently taxable should be labeled with Code Z. (Talk to your tax professional about this.)
- Differential wage payments to individuals on active military duty for more than 30 days should be included in box 1.
- The aggregate cost of employer-provided health insurance should be in box 12 using the code of DD.
- The box 13 “retirement plan” should be marked as an active participant if the employee is eligible to participate in either a defined benefit plan or a defined contribution plan.
W-2 Filing Tips # 6 - Reconciliation of W-2’s:
- The Form W-3 needs to be reconciled to the four quarterly Form 941’s or annual 943 or 944.
- The totals on the Form W-3 must equal the total of all of the W-2’s for each of the boxes.
- Check individual W-2’s to make sure of the following:
- Boxes 3 and 7 do not exceed $ 110,100.
- Box 4 does not exceed $ 4624.20.
- Box 3 and 5 are equal if the amount of wages paid was $ 110,100 or less.
- Box 4 equals box 3 plus box 7 times 4.20% If not the differences are reconciled by the amounts in box 12, codes A and M.
- Box 6 equals box 5 times 1.45%. If not the differences are reconciled by the amounts in box 12, codes B and N.
- Box 7 agrees to the amounts reported by the employee.
- Box 8 amounts are excluded from boxes 1, 3, 5, and 7.
CONTACT US: Please inquire with us if you’d like to learn more about W-2 filing or how our Sage 100 ERP consultants can help your business uncover hidden revenue and cost-savings.
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