Tuesday, January 28, 2014

2013 FICA-Medicare withheld only prints $2,900 on W-2

81-Confused-Blue-Smiley-Free-3D-Vector-Clipart-Illustration

Only $2,900. . .what’s up with that? As we all are frantically preparing our W-2s, an anomaly (a bug, really) has reared its head. It applies to those employees with FICA Medicare wages in excess of $200,000. As you know, the 2.35% Medicare rate kicks in at that amount. The extra withholding is calculated correctly on the pay checks and everything looks right on the Year End Wage report.

The Problem

Although the year end wage report is correct, when the W-2s print, the amount in the Medicare withheld box is only $2,900. Suppose this employee made $350,000 and really had $6,425 in Medicare withholding. Eeek! Chances are, the folks making more than $200,000 on the salary scale, are pretty high up in the organization. These are not the people to whom you want to give an incorrect W-2.  So what happened to the extra $3,525 that was withheld, and how do you get it on the W-2?

How it happens

We had a similar problem when the tax rates were split between employer and employee in 2011/2012 and the following year’s tax tables were loaded before the current year payroll was closed. I discuss that problem on the post How is FICA/S wages and withholding calculated?.

While this problem manifests itself in the same way, it isn’t because the tax tables were not properly loaded. It has to do with how Dynamics GP calculates the amount that goes into the Medicare withheld box.

When you close the payroll year, the system creates the Payroll Year-End Header record in the UPR10100 table. It also adds a record for each employee to the Payroll Year End Wage table UPR10101. The numbers in the Payroll Year End Wage table are taken from the Payroll Employee Summary (UPR00900) and therefore reflects the actual amounts.

When you close the payroll year, the Payroll Year End Header (UPR10100) table is populated. Among the information pulled into this table, are the FICA/SS and FICA/M rates and wage limits. The numbers come from whatever values are in the tax tables at the time of the close. The  Payroll Year-End Wage (UPR10100)  table is also populated at this time. The Year-End Wage table gets its numbers from the Payroll Employee Summary table, that table holds the actual amounts from the employees’ paychecks. The Year End Employee Wage Report is created from the Year-End Wage table and that’s why it shows the full amount of the FICA/M withheld. The year end wage report does not read the FICA/M or FICA/SS amounts from the header.

The W-2 Validation report calculates its amounts on the fly when you print the report. The Validation report gets its rates from the tax table itself. Here’s the rub – there is only one field in the header table in which to store the FICA rate (TICAMTRT). The Medicare rate is pulled from the first row of the FICA/M tax table. Therefore, the rate recorded for 2013 was 1.45%. Another field in the header table (FICAMWLM) stores the Medicare wage limit . Sometimes, the value of $200,000 fills the FICAMWLM field. I do not know the set of circumstances that cause this.

When you print W-2s, the system calculates the maximum amount of Medicare withholding allowed by law based on the wage limit and rate stored in the header table. Dynamics GP will not print a number greater than this calculated maximum on the the W-2, regardless of how much was actually withheld. If the FICAMWLM field has a value of $200,000 in it, Medicare withheld on the W-2 will be limited to $2,900 (.0145 * $200,000).

The Fix

Fortunately, this is an easy problem to fix. All you need to do is set the value of UPR10101.FICAMWLM to zero. This SQL statement will accomplish the task: Update UPR10101 set FICAMWLM = 0

With no wage limit, there is no maximum. Your W-2s will now print with the full amount of Medicare withheld.

Until next post!

Leslie

Wednesday, January 22, 2014

W-2 Other Codes for Box 12

 

calculator

With the W-2 season upon us, I thought now would be a good time to point out some items that should live in Box 12; but often don’t make it there. I’m not attempting to give any tax or accounting advice, just to share some information with you about Box 12.

Box 12 looks simple enough, but oh what a secret she keeps:
2013 form W-2

Recently, I posted an article about common errors regarding retirement account information. In this post, I’ll review the items that should be reported in box 12. In the 30 years I’ve been working with Forms W-2 in various capacities, I have never seen an employer follow all of the items the IRS says should be included in box 12. 

The table below comes from the W-2 instructions on the form itself:

Box 12 Code

Description

A

Uncollected Social Security or RRTA tax on tips

B

Uncollected Medicare tax on tips

C

Taxable cost of group-term life insurance over $50,000

D

Elective deferrals to a section 401(k) cash or deferred arrangement. Also includes deferrals under a SIMPLE retirement account that is part of a section 401(k) arrangement

E

Elective deferrals under section 403(b) salary reduction agreement with your employer

F

Elective deferrals under a section 408(k)(6) salary reduction SEP

G

Elective deferrals and employer contributions (including non-elective deferrals) to a section 457(b) deferred compensation plan

H

Elective deferrals to a section 501c(18)(D) tax-exempt organization plan

J

Nontaxable sick pay (information only, not included in boxes 1, 3, or 5)

K

Twenty percent (20%) excise tax on excess golden parachute payments

L

Substantiated employee business expense reimbursements (nontaxable)

M

Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (former employees only)

N

Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (former employees only)

P

Excludable moving expense reimbursements paid directly to employee (not included in boxes 1, 3, or 5)

Q

Nontaxable combat pay

R

Employer contributions to your Archer MSA.

S

Employee salary reduction contributions under a section 408(p) SIMPLE plan (not included in box 1)

T

Adoption benefits (not included in box 1)

V

Income from exercise of non-statutory stock option(s) (included in boxes 1, 3 (up to social security wage base), and 5)

W

Employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to your health savings account

Y

Deferrals under a section 409A nonqualified deferred compensation plan

Z

Income under section 409A on a nonqualified deferred compensation plan. This amount is also included in box 1. It is subject to an additional 20% tax plus interest.

AA

Designated Roth contributions under section 401(k) plan

BB

Designated Roth contributions under section 403(b) plan

DD

Cost of employer-sponsored health coverage (this is not taxable when Code DD)

EE

Designated Roth contributions under a governmental section 457(b) plan. This amount does not apply to contributions under a tax-exempt organization section 457(b) plan.

I have highlighted three of the items that I often see overlooked by employers.

Code C – taxable cost of group-term life insurance over $50,000

If an employer provides life insurance for their employees, and the death benefit is more than $50,000, an amount should be included in wages based an an IRS formula.

In most cases, the cost of up to $50,000 of group-term life insurance coverage provided by an employer is not included in income. However, the cost of employer-provided coverage over $50,000 should be included in the taxable income of the employee.

This taxable amount is subject to withholding for FICA and Medicare, but not Federal Income tax.

For example, let’s say a 50 year-old employee was provided a $200,000 life insurance policy. The first $50,000 of coverage is not taxable, however, the remaining $150,000 is taxed based on the IRS’s calculation. The IRS numbers are in the following table:

Age

Taxable Cost per $1,000, per month

Under 25

0.05

25 - 29

0.06

30 - 34

0.08

35 - 39

0.09

40 - 44

0.10

45 - 49

0.15

50 - 54

0.23

55 - 59

0.43

60 - 64

0.66

65 - 69

1.27

70 and older

2.06

Using the above table, this employee should have an additional $414.00 included in box 1 and box 12 with code C. He had an extra $150,000 of insurance for 12 months. The calculation would be 150 x 12 x .23 = 414.00.

Code L – substantiated employee business expense reimbursements

This one is real shocker to most people. Any time your employee submits an expense report that is supported with receipts, or conforms to the governmental per diem or mileage rates, the amount that you reimburse him or her should be included in box 12 of Form W-2 with code ‘L’. The amount is not taxable, and therefore not included in Box 1; but it should be reported in box 12. As I understand it, the theory behind this is that it gives the IRS a heads up should the employee try to deduct the expenses on Form 2106 (Employee Business Expense) on his personal 1040.

Code P – excludable moving expense reimbursements

The amount under code P is the amount you reimbursed your employee for ‘qualified’ moving expenses that were not includable in their taxable income. The amount in this box is not included in boxes 1, 3 or 5. If the employees ‘qualified’ moving expenses exceeded the code P amount, they may be able to deduct the extra expenses on Form 3903 filed with their Form 1040. The code P amount does not need to be included anywhere on the Form 1040 if Form 3903 is not filed with the return.

As in all IRS rules, there are pages of additional information regarding what should be reported where. The above is certainly not an authoritative document. If you think any of this might apply to you, contact your accounting/tax advisor for additional information.

Good luck with tax season.

Until next post!

Leslie

Friday, January 17, 2014

Dynamics GP Excel Dashboard available now!

 

This comes to us from one of Dynamics GP’s finest, the infamous Mark Polino! Jump to  www.DynamicAccounting.net/Analytics to get more details.

This is the truly painless way to get started with Excel dashboards, have someone else do it for you Smile. Imagine, an Excel dashboard with all of the bells and whistles ready to go. We’ve all seen and heard how cool dashboards are, and wish we had the time to figure out how to create them. Well, the time has been reduced to just a few minutes. Seriously, the dashboard is easy to install; and, honestly, I do mean easy.

Simplicity is a word that appeals to me, and Mark’s Excel dashboard falls into that category. One of the things I like to point out during my development/tool classes is that you should ALWAYS look around to see if anyone else has already created the thing you are wanting to create. So many times, the answer is yes.  This is one of those yes times.

If you want to get started, but can’t carve out the hours it takes to develop this anew, this is for you.

Though the dashboard is perfectly fine just like it is, you have the option to change it however you want. We all know that changing something is far easier than creating it from scratch.

Can you say plug and play?  I am among the laziest people out there. I know the macro language so well because it saves me time and clicks.  If I can save clicks, I’m all for it! This is my kind of dashboard; just connect it to your data source and you’re ready to go. And fear not, if data sources are not your area of expertise, Mark makes that easy too.

So what’s available? Mark has released a dashboard for the Sales series. Here’s what it includes:

● Top Customers with corresponding costs               
● Top Items with corresponding costs               
● Top Salespeople, Territories and Sites               
● Sales over time with forward looking projection               
● Sales mix over time by item class               
● A full range of data filters to control information

Click the link and check it out.

How many of these do you think Mark can develop in 50 minutes?   

Until next post!

Leslie          

2014 Payroll Tax Tables–how to fill out manually

I’ve been getting quite a few calls lately about how to get the new 2014 tax tables if they can no longer get them from Microsoft. These folks are on versions 9 or 10, so they are out of luck on the download. Scandalous though it may be to remain on an unsupported version, they still have to update their tax tables. Fortunately, you can easily change the tax rates yourself using Dynamics GP.

After applying the current tax tables (as of 01-16-2014), this is what the windows look like:

FICAM 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button2014 FICAM no tear

 FICAS 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
image

EFICM

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
2014 EFICM no tear

EFICS 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] buttonimage

FED SINGLE 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status SINGLE
Push the [Tables] buttonPayroll Tax Tables FED SINGLE

FED MAR 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status MAR
Push the [Tables] buttonPayroll Tax Tables FED MAR

FED NRA 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NRA
Push the [Tables] buttonPayroll Tax Tables FED NRA

If you can’t read the screen shots, I also have the numbers for both the 2014 and 2013 in the tables below:

FICAM 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$200,000

$0.00

1.45%

$0.00

$200,000

$0.00

$0.00

2.35%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

FICAS 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$117,000

$0.00

6.20%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

EFICM 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$0.00

$0.00

1.45%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

EFICS 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$117,000

$0.00

6.20%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

FED SINGLE 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status SINGLE
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$2,250.00

$0.00

0.00%

$0.00

$2,250.00

$11,325.00

$0.00

10.00%

$2,250.00

$11,325.00

$39,150.00

$907.50

15.00%

$11,325.00

$39,150.00

$91,600.00

$5,081.25

25.00%

$39,150.00

$91,600.00

$188,600.00

$18,193.75

28.00%

$91,600.00

$188,600.00

$407,350.00

$45,353.75

33.00%

$188,600.00

$407,350.00

$409,000.00

$117,541.25

35.00%

$407,350.00

$409,000.00

$0.00

$118,118.75

39.60%

$409,000.00

$0.00

$0.00

$0.00

0.00%

$0.00

FED MAR 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status MAR
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$8,450.00

$0.00

0.00%

$0.00

$8,450.00

$26,600.00

$0.00

10.00%

$8,450.00

$26,600.00

$82,250.00

$1,815.00

15.00%

$26,600.00

$82,250.00

$157,300.00

$10,162.50

25.00%

$82,250.00

$157,300.00

$188,600.00

$28,925.00

28.00%

$157,300.00

$235,300.00

$413,550.00

$50,765.00

33.00%

$235,300.00

$413,550.00

$466,050.00

$109,587.50

35.00%

$413,550.00

$466,050.00

$0.00

$127,962.50

39.60%

$466,050.00

$0.00

$0.00

$0.00

0.00%

$0.00

FED NRA 2014

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NRA
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$9,075.00

$0.00

10.00%

$0.00

$9,075.00

$36,900.00

$907.50

15.00%

$9075.00

$36,900.00

$89,350.00

$5,081.25

25.00%

$36,900.00

$89,350.00

$186,350.00

$18,193.75

28.00%

$89,350.00

$186,350.00

$405,100.00

$45,353.75

33.00%

$186,350.00

$405,100.00

$406,750.00

$117,541.25

35.00%

$405,100.00

$406,750.00

$0.00

$118,118.75

39.60%

$406,750.00

$0.00

$0.00

$0.00

0.00%

$0.00

Now for the 2013 Tax Tables:

FICAM 2013

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$200,000

$0.00

1.45%

$0.00

$200,000

$0.00

$0.00

2.35%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

FICAS 2013

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$113,700

$0.00

6.20%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

EFICM 2013

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$0.00

$0.00

1.45%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

EFICS 2013

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NA
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$113,700

$0.00

6.20%

$0.00

$0.00

$0.00

$0.00

0.00%

$0.00

FED SINGLE 2013

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status SINGLE
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$2,200.00

$0.00

0.00%

$0.00

$2,200.00

$11,125.00

$0.00

10.00%

$2,200.00

$11,125.00

$38,450.00

$892.50

15.00%

$11,125.00

$38,450.00

$90,050.00

$4,991.25

25.00%

$38,450.00

$90,050.00

$185,450.00

$17,891.25

28.00%

$90,050.00

$185,450.00

$400,550.00

$44,603.25

33.00%

$185,450.00

$400,550.00

$402,200.00

$115,586.25

35.00%

$400,550.00

$402,200.00

$0.00

$116,163.75

39.60%

$402,200.00

$0.00

$0.00

$0.00

0.00%

$0.00

FED MAR 2013

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status MAR
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$8,300.00

$0.00

0.00%

$0.00

$8,300.00

$26,150.00

$0.00

10.00%

$8,300.00

$26,150.00

$80,800.00

$1,785.00

15.00%

$26,150.00

$80,800.00

$154,700.00

$9,982.50

25.00%

$80,800.00

$154,700.00

$231,350.00

$28,457.50

28.00%

$154,700.00

$231,350.00

$406,650.00

$49,919.50

33.00%

$231,350.00

$406,650.00

$458,300.00

$107,768.50

35.00%

$406,650.00

$458,300.00

$0.00

$125,846.00

39.60%

$458,300.00

$0.00

$0.00

$0.00

0.00%

$0.00

FED NRA 2013

Administration | Setup | System | Payroll Tax
Enter or select the Tax Code
Push the [Filing Status] button
Scroll to Filing Status NRA
Push the [Tables] button
 
If Over But Not Over Tax Amount Tax Rate On Excess Over

$0.00

$8,925.00

$0.00

10.00%

$0.00

$8,925.00

$36,250.00

$892.50

15.00%

$9075.00

$36,250.00

$87,850.00

$4,991.25

25.00%

$36,900.00

$87,850.00

$183,250.00

$17,891.25

28.00%

$89,350.00

$183,250.00

$398,350.00

$44,603.25

33.00%

$186,350.00

$398,350.00

$400,000.00

$115,586.25

35.00%

$405,100.00

$400,000.00

$0.00

$116,163.75

39.60%

$406,750.00

$0.00

$0.00

$0.00

0.00%

$0.00

 

That should do it!

Until next post

Leslie

Sunday, January 12, 2014

There is an error with at least one vendor record, print the customer/vendor record for details

This is an error I thought I’d add to our ‘When Things Go Wrong’ section. My thanks goes to Alaa Ramadan, who both identified the error and discovered it’s solution.  You can find the thread here.

The error presented itself when the user was attempting to complete a refund check transaction in the RM module. (Sales | Transactions | Refund Checks).

As it turned out, the associated vendor record had been put on hold thus preventing the refund check creation.  Clearing the hold checkbox on the Vendor Maintenance window solved the problem.

Thanks Alaa!

Until next post,

Leslie

Wednesday, January 8, 2014

Form W-2 Common Errors - Codes for Retirement Plans

This information comes straight from our friends at the IRS, it describes common mistakes made on Forms W-2. I have run into many of these as our clients begin to prepare their annual filings.

If you find that you are missing any of these items, be sure to modify the payroll card rather than just editing the W-2. If you need to change the W-2 (and W-3), you can re-create the year-end wage file.

If you have already loaded the 2014 tax tables, change the FICA table to reflect the 2013 amounts before re-creating the files. Change them back when you are done. Listed below are the rates for 2013 and 2014
Code Year Rate Limit
EFICM 2013 1.45% no limit
EFICS 2013 6.2% $113,700
FICAM 2013 1.45% up to $200,000
FICAM 2013 2.35% over $200,000
FICAS 2013 6.2% $113,700
       
EFICM 2014 1.45% no limit
EFICS 2014 6.2% $117,000
FICAM 2014 1.45% up to $200,000
FICAM 2014 2.35% over $200,000
FICAS 2014 6.2% $117,000

Depending on how many you have to change, you could also edit the Year-end wage files.  Those files are:

Physical Name Technical Name
UPR10100

UPR_Year_End_WORK_HDR

UPR10101

UPR_Year_End_WORK_Wage

UPR10103

UPR_Year_End_WORK_Pension

UPR10104

UPR_Year_End_WORK_Special

UPR10105

UPR_Year_End_WORK_State

UPR10106

UPR_Year_End_WORK_Local

UPR10107

UPR_Year_End_WORK_Other

Here are the IRS rules:

You must ensure that the information on Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage & Tax Statements, you issue to your employees contains correct retirement plan information because:

  • employees need accurate information to determine the correct deductions and credits on their tax return, and
  • IRS agents use the information from these forms to determine whether employers are complying with income and employment tax reporting requirements.

Common mistakes
During Form 5500 examinations and EPCU projects, IRS agents found employers using incorrect codes in Box 12 of Form W-2, for example:

  • code D for 401(k) elective deferrals incorrectly included 403(b), 457, or non-qualified amounts.
  • code E for 403(b) contributions but did not have a 403(b) plan.
  • code H to incorrectly report health benefits; code H is for elective deferrals to a 501(c)(18)(D) tax-exempt organization plan. (In fact, a recent Employee Plan Compliance Unit project found that only 6 % of employers who used this code actually contributed to a 501(c)(18) plan.)
  • code S for a SIMPLE 401(k); the correct code for a SIMPLE 401(k) is code D.

Common codes used for Box 12

Letter code:
Used for:
Description:

D
401(k) contributions
Elective deferrals to a 401(k) cash or deferred arrangement, including SIMPLE 401(k)s

E
403(b) contributions
Elective deferrals made under a 403(b) salary reduction agreement

F
408(k)(6) contributions
Elective deferrals made under a SARSEP

G
457(b) contributions
Elective and nonelective deferrals made to a 457(b) deferred compensation plan

H
501(c)(18)(D) contributions
Elective deferrals to a Section 501(c)(18)(D) tax-exempt organization plan (Included in the "Wages, Tips, Comp." amount in Box 1)

S
408(p) SIMPLE contributions
Deferrals made under a SIMPLE IRA plan

AA
Roth contributions
Designated Roth contributions under a 401(k) plan

BB
Roth contributions
Designated Roth contributions under a 403(b) plan

EE
Roth contributions
Designated Roth contributions under a governmental 457(b) plan (a tax-exempt organization’s 457(b) can’t have a designated Roth account)

See the Instructions for Forms W-2 and W-3 for a complete list of codes.

Form W-2, Box 13
The “Retirement plan” indicator in Box 13 shows whether an employee is an active participant in your company’s plan. If this box is checked, it lets the recipient know that depending on their filing status and modified adjusted gross income, they may not be entitled to a full deduction for their traditional IRA contributions. You should check the retirement plan box if an employee was an “active participant” for any part of the year in:

  • a qualified pension, profit-sharing, or stock-bonus plan under Internal Revenue Code Section 401(a) (including a 401(k) plan).
  • an annuity plan under IRC Section 403(a).
  • an annuity contract or custodial account under IRC Section 403(b).
  • a simplified employee pension (SEP) under IRC Section 408(k).
  • a SIMPLE retirement account under IRC Section 408(p).
  • a trust described in IRC Section 501(c)(18).
  • a plan for federal, state, or local government employees or by an agency or instrumentality thereof (other than a 457(b) plan).

Active participant
Generally, an employee is an active participant if covered by a:

  • defined contribution plan (for example, a 401(k) plan) for any tax year and is credited with any contributions or forfeitures, or
  • defined benefit plan for any tax year that the employee is eligible to participate.

Don’t check the retirement plan box if your company only has non-qualified or 457(b) plans.

Form W-3, Box b
Form W-3, Box b has checkboxes to specify the type of employer filing the form. You should check the appropriate box if you are a:

  • non-governmental tax-exempt 501(c) organization;
  • state or local government or instrumentality;
  • state or local government or instrumentality and have received a determination letter from the IRS indicating that you are also a 501(c)(3) tax-exempt organization; or
  • federal government entity or instrumentality.

Otherwise, you should check the “None apply” box. Only check one box.

Page Last Reviewed or Updated: 22-Nov-2013

Until next post!

Leslie Vail