Here it is, Part 2 of our W-2 Filing Checklist. Need a refresher? You can find Part 1 here. There are many sources of information for employers about filing W-2’s.
Tip 5: Reporting Wage Data
- All taxable, non-cash and non-payroll wages, compensation and other benefits must be included on the Form W-2.
- All fringe benefits and non-payroll compensation amounts needs to be clearly documented for each employee.
- The nontaxable portion of dependent care assistance is included in box 10.
- Dependent care assistance (excess taxable portion) is included in boxes 1, 3, 5, and 10
- Non-accountable plan business expenses are included in boxes 1, 3 and 5
- The 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 are included in boxes 3, 5, 12 using code "D" and box 13 marked
- Designated Roth contributions to a Section 401(k), 403(b) or 457 plan are listed in boxes 1, 3, 5 and 12 "AA", "BB" or "EE" code used.
- SEP employee contributions should be listed in boxes 3, 5, 12 using code "F" and box 13 marked.
- Taxable fringe benefits not included in boxes 10 or 12 (ex: personal use of company auto) should be included in boxes 1, 3, 5 and box 14 at the employer’s discretion.
- If the annual lease value of a company auto is included in the employee’s income, the value should also be reported in box 14 or on a separate statement.
- Deceased worker’s wages paid prior to death are listed 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 are included in box 12-code P
- Reimbursed taxable moving expenses included in boxes 1, 3 and 5.
- Allocated tips are included in box 8 only. Tips reported by the employee are 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/or health insurance premiums for greater than 2% shareholder-employees paid by an S-Corp should be included in box 1. They may also be included in boxes 3 and 5 if exclusion under IRC Sec. 3121(a)(2)(B) is not met. If you have questions, discuss this with your tax professional.
- Employee business expenses with per diem allowances in excess of IRS federal rate allowances are listed in the excess 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 is listed in box 12 using code "J"
- All employer contributions to an employee’s Archer MSA are included in box 12 using code "R". Employer contributions to an employee’s (HSA) should be in box 12 with Code "W".
- Employer payments for qualified adoption expenses under adoption assistance plans are included in box 12 using 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". Discuss this with your tax professional about this if you have questions.
- Differential wage payments to individuals on active military duty for more than 30 days are included in box 1
- The aggregate cost of employer-provided health insurance should be in box 12 using the code of "DD"
- Box 13 “retirement plan” should be marked as "active participant" if the employee is eligible to participate in either a defined benefit plan or a defined contribution plan.
Tip 6: Reconciliation of W-2's
- The Form W-3 must be reconciled to the four quarterly Form 941’s or annual 943/944.
- 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 and the amounts reported by the employee are equal
- Box 8 amounts are excluded from boxes 1, 3, 5 and 7
Clear as mud? Tax session can cause plenty of headaches and confusion. Be sure to cross your "t"s, dot your "i"s and keep Tylenol and the number of your tax professional handy!