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2006 Tax Return

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2006 Tax Return

2006 tax return Index A Accelerated Cost Recovery System (ACRS), MACRS Depreciation (see also Modified Accelerated Cost Recovery System (MACRS)) Effective date, Depreciation Methods Accounting methods Accrual method, Accrual method. 2006 tax return Cash method, Cash method. 2006 tax return Change of method, Changing your accounting method. 2006 tax return Constructive receipt of income, Cash method. 2006 tax return , More information. 2006 tax return Accrual method taxpayers, Accrual method. 2006 tax return ACRS (Accelerated Cost Recovery System) Effective date, Depreciation Methods Active participation, Active participation. 2006 tax return Activities not for profit, Duplex. 2006 tax return Additions to property, Additions or improvements to property. 2006 tax return (see also Improvements) Basis, Increases to basis. 2006 tax return , Additions or improvements. 2006 tax return MACRS recovery period, Additions or improvements to property. 2006 tax return Adjusted basis MACRS depreciation, Adjusted Basis Adjusted gross income (AGI) Modified (see Modified adjusted gross income (MAGI)) Advance rent, Advance rent. 2006 tax return Security deposits, Security deposits. 2006 tax return Advertising, Types of Expenses Allocation of expenses Change of property to rental use, Payments added to capital account. 2006 tax return How to divide expenses, Dividing Expenses Part of property rented, Renting Part of Property, How to divide expenses. 2006 tax return Personal use of rental property, Personal use of rental property. 2006 tax return , Personal Use of Dwelling Unit (Including Vacation Home) Alternative Depreciation System (ADS) Election of, Electing ADS MACRS, MACRS Depreciation, Table 2-2d. 2006 tax return Alternative minimum tax (AMT) Accelerated depreciation methods, Alternative minimum tax (AMT). 2006 tax return Amended returns, Filing an amended return. 2006 tax return Apartments Basement apartments, Examples. 2006 tax return Dwelling units, Dwelling unit. 2006 tax return Appraisal fees, Settlement fees and other costs. 2006 tax return Assessments for maintenance, Assessments for local improvements. 2006 tax return Assessments, local (see Local assessments) Assistance (see Tax help) Assumption of mortgage, Assumption of a mortgage. 2006 tax return Attorneys' fees, Settlement fees and other costs. 2006 tax return , Increases to basis. 2006 tax return Automobiles MACRS recovery periods, Property Classes Under GDS B Basis Adjusted basis, Adjusted Basis Assessments for local improvements, Assessments for local improvements. 2006 tax return Basis other than cost, Basis Other Than Cost Cost basis, Cost Basis Decreases to, Decreases to basis. 2006 tax return Deductions Capitalization of costs vs. 2006 tax return , Deducting vs. 2006 tax return capitalizing costs. 2006 tax return Not greater than basis, Cost or Other Basis Fully Recovered Fair market value, Fair market value. 2006 tax return Increases to, Increases to basis. 2006 tax return MACRS depreciable basis, Basis of Depreciable Property Property changed to rental use, Basis of Property Changed to Rental Use C Capital expenditures Deductions vs. 2006 tax return effect on basis, Deducting vs. 2006 tax return capitalizing costs. 2006 tax return Local benefit taxes, Local benefit taxes. 2006 tax return Mortgages, payments to obtain, Expenses paid to obtain a mortgage. 2006 tax return Cars MACRS recovery periods, Property Classes Under GDS Cash method taxpayers, Cash method. 2006 tax return Casualty losses, Exception for Rental Real Estate With Active Participation Change of accounting method, Changing your accounting method. 2006 tax return Charitable contributions Use of property, Donation of use of the property. 2006 tax return Cleaning and maintenance, Types of Expenses Closing costs, Settlement fees and other costs. 2006 tax return Commissions, Types of Expenses Computers MACRS recovery periods, Property Classes Under GDS Condominiums, Condominiums, Dwelling unit. 2006 tax return Constructive receipt of income, Cash method. 2006 tax return , More information. 2006 tax return Cooperative housing, Cooperative apartments. 2006 tax return , Cooperatives, Dwelling unit. 2006 tax return Cost basis, Cost Basis Credit reports, Settlement fees and other costs. 2006 tax return Credits Residential energy credits, Decreases to basis. 2006 tax return D Days of personal use, What is a day of personal use? Days used for repairs and maintenance, Days used for repairs and maintenance. 2006 tax return Deductions Capitalizing costs vs. 2006 tax return effect on basis, Deducting vs. 2006 tax return capitalizing costs. 2006 tax return Depreciation (see Depreciation) Limitations on, Form 4562. 2006 tax return Passive activity losses (see Passive activity) Depreciation, Depreciation of Rental Property, Changing your accounting method. 2006 tax return Alternative Depreciation System (ADS) (see Modified Accelerated Cost Recovery System (MACRS)) Basis (see Basis) Change of accounting method, Changing your accounting method. 2006 tax return Change of property to rental use, Property Changed to Rental Use Claiming correct amount of, Claiming the Correct Amount of Depreciation Declining balance method, Depreciation Methods Duration of property expected to last more than one year, What Rental Property Can Be Depreciated? Eligible property, What Rental Property Can Be Depreciated? First-year expensing, Section 179 deduction. 2006 tax return MACRS (see Modified Accelerated Cost Recovery System (MACRS)) Methods, Depreciation Methods, Figuring Your Depreciation Deduction Ownership of property, What Rental Property Can Be Depreciated?, Property you own. 2006 tax return Rental expense, Depreciation. 2006 tax return Rented property, Rented property. 2006 tax return Section 179 deduction, Section 179 deduction. 2006 tax return Special depreciation allowances, Claiming the Special Depreciation Allowance Straight line method, Depreciation Methods Useful life, What Rental Property Can Be Depreciated?, Property having a determinable useful life. 2006 tax return Vacant rental property, Vacant rental property. 2006 tax return Discount, bonds and notes issued at (see Original issue discount (OID)) Dividing of expenses (see Allocation of expenses) Dwelling units Definition, Dwelling unit. 2006 tax return Fair rental price, Fair rental price. 2006 tax return Personal use of, Personal Use of Dwelling Unit (Including Vacation Home), What is a day of personal use? E Easements, Decreases to basis. 2006 tax return Equipment rental expense, Rental of equipment. 2006 tax return F Fair market value (FMV), Fair market value. 2006 tax return Fair rental price, Dividing Expenses, Fair rental price. 2006 tax return Fees Loan origination fees, Points, Settlement fees and other costs. 2006 tax return Points (see Points) Settlement fees and other costs, Settlement fees and other costs. 2006 tax return Tax return preparation fees, Legal and other professional fees. 2006 tax return First-year expensing, Section 179 deduction. 2006 tax return Form 1040 Not rented for profit income, Where to report. 2006 tax return Part of property rented, Renting Part of Property Rental income and expenses, Reporting Rental Income, Expenses, and Losses Schedule E, Schedule E (Form 1040) Form 1098 Mortgage interest, Form 1098, Mortgage Interest Statement. 2006 tax return Form 4684 Casualties and thefts, How to report. 2006 tax return Form 4797 Sales of business property, How to report. 2006 tax return Form 8582 Passive activity losses, Form 8582. 2006 tax return , Form 8582 not required. 2006 tax return Free tax services, Free help with your tax return. 2006 tax return G Gains and losses At-risk rules, At-Risk Rules Casualty and theft losses, Exception for Rental Real Estate With Active Participation Limits on rental losses, Form 4562. 2006 tax return Passive activity losses, Passive Activity Limits Rental real estate activities, Exception for Rental Real Estate With Active Participation Sale of rental property, Sale or exchange of rental property. 2006 tax return , How to report. 2006 tax return General depreciation system (GDS) (see Modified Accelerated Cost Recovery System (MACRS)) H Help (see Tax help) Home Main home, Main home. 2006 tax return Use as rental property (see Use of home) I Improvements, Table 1-1. 2006 tax return Examples of Improvements (see also Repairs) Assessments for local improvements, Assessments for local improvements. 2006 tax return Basis, Increases to basis. 2006 tax return , Additions or improvements. 2006 tax return Depreciation of rented property, Rented property. 2006 tax return MACRS recovery period, Additions or improvements to property. 2006 tax return Insurance, Types of Expenses Casualty or theft loss payments, Decreases to basis. 2006 tax return Change of property to rental use, Property Changed to Rental Use Fire insurance premiums, cost basis, Settlement fees and other costs. 2006 tax return Part of property rented, Renting Part of Property Premiums paid in advance, Insurance premiums paid in advance. 2006 tax return Title insurance, cost basis, Settlement fees and other costs. 2006 tax return Interest payments, Interest expense. 2006 tax return (see also Mortgages) Loan origination fees, Points Rental expenses, Types of Expenses L Land Cost basis, Separating cost of land and buildings. 2006 tax return Depreciation, Land. 2006 tax return Leases Cancellation payments, Canceling a lease. 2006 tax return Equipment leasing, Rental of equipment. 2006 tax return Limits Passive activity losses and credits, Passive Activity Limits Rental losses, Limits on Rental Losses Loans Assumption fees, Settlement fees and other costs. 2006 tax return Charges connected with getting or refinancing, cost basis, Settlement fees and other costs. 2006 tax return Low or no interest, Loans with low or no interest. 2006 tax return Origination fees, Points Local assessments, Assessments for local improvements. 2006 tax return Losses (see Gains and losses) M Missing children, photographs of, Reminders Modified Accelerated Cost Recovery System (MACRS), MACRS Depreciation, Figuring MACRS Depreciation Under ADS Additions or improvements to property, Additions or improvements to property. 2006 tax return Adjusted basis, Adjusted Basis Alternative Depreciation System (ADS), MACRS Depreciation, Figuring MACRS Depreciation Under ADS Basis other than cost, Basis Other Than Cost Conventions, Conventions Cost basis, Cost Basis Depreciable basis, Basis of Depreciable Property Effective date, Depreciation Methods Excluded property, Excluded Property General Depreciation System (GDS), MACRS Depreciation, Property Classes Under GDS, Figuring Your Depreciation Deduction Nonresidential rental property, Property Classes Under GDS Property used in rental activities (Table 2-1), Table 2-1. 2006 tax return MACRS Recovery Periods for Property Used in Rental Activities Recovery periods, Table 2-1. 2006 tax return MACRS Recovery Periods for Property Used in Rental Activities, 5-, 7-, or 15-year property. 2006 tax return Residential rental property, Property Classes Under GDS, Residential rental property. 2006 tax return Special depreciation allowances, Claiming the Special Depreciation Allowance Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). 2006 tax return Mortgages, Expenses paid to obtain a mortgage. 2006 tax return Assumption of, cost basis, Assumption of a mortgage. 2006 tax return Change of property to rental use, Property Changed to Rental Use End of, OID, Loan or mortgage ends. 2006 tax return Interest, Interest expense. 2006 tax return , Property Changed to Rental Use, Renting Part of Property Mortgage insurance premiums, Settlement fees and other costs. 2006 tax return Part of property rented, Renting Part of Property N Nonresidential real property, Property Classes Under GDS Not-for-profit activities, Duplex. 2006 tax return O Original issue discount (OID), Points, Loan or mortgage ends. 2006 tax return P Part interest Expenses, Part interest. 2006 tax return Income, Part interest. 2006 tax return Passive activity Maximum special allowance, Maximum special allowance. 2006 tax return Personal property Rental income from, Property or services. 2006 tax return Personal use of rental property, Payments added to capital account. 2006 tax return , Personal Use of Dwelling Unit (Including Vacation Home) (see also Property changed to rental use) Placed-in-service date, Placed in Service Points, Types of Expenses, Points, Settlement fees and other costs. 2006 tax return Pre-rental expenses, Pre-rental expenses. 2006 tax return Principal residence (see Home) Profit, property not rented for, Duplex. 2006 tax return Property changed to rental use, Payments added to capital account. 2006 tax return Basis, Basis of Property Changed to Rental Use Publications (see Tax help) R Real estate professionals, Real estate professionals. 2006 tax return Real estate taxes, Real estate taxes. 2006 tax return Real property trades or businesses, Real property trades or businesses. 2006 tax return Recordkeeping requirements Travel and transportation expenses, Local transportation expenses. 2006 tax return , Travel expenses. 2006 tax return Recovery periods, Property Classes Under GDS Rent, Settlement fees and other costs. 2006 tax return Advance rent, Advance rent. 2006 tax return Fair price, Fair rental price. 2006 tax return Rental expenses, Rental Expenses Advertising, Types of Expenses Allocation between rental and personal uses, Dividing Expenses Change of property to rental use, Property Changed to Rental Use Cleaning and maintenance, Types of Expenses Commissions, Types of Expenses Depreciation, Depreciation. 2006 tax return Dwelling unit used as home, Dwelling Unit Used as a Home Equipment rental, Rental of equipment. 2006 tax return Home, property also used as, Rental of property also used as your home. 2006 tax return Improvements, Table 1-1. 2006 tax return Examples of Improvements Insurance, Types of Expenses, Insurance premiums paid in advance. 2006 tax return Interest payments, Types of Expenses, Interest expense. 2006 tax return Local transportation expenses, Types of Expenses, Local transportation expenses. 2006 tax return Part of property rented, Renting Part of Property Points, Types of Expenses, Points Pre-rental expenses, Pre-rental expenses. 2006 tax return Rental payments, Types of Expenses Repairs, Types of Expenses, Repairs and Improvements Sale of property, Vacant while listed for sale. 2006 tax return Tax return preparation fees, Legal and other professional fees. 2006 tax return Taxes, Types of Expenses Tenant, paid by, Expenses paid by tenant. 2006 tax return Travel expenses, Types of Expenses Utilities, Types of Expenses Vacant rental property, Vacant rental property. 2006 tax return Rental income Advance rent, Advance rent. 2006 tax return Cancellation of lease payments, Canceling a lease. 2006 tax return Dwelling unit used as home, Dwelling Unit Used as a Home Lease with option to buy, Lease with option to buy. 2006 tax return Not rented for profit, Not Rented for Profit Part interest, Part interest. 2006 tax return Property received from tenant, Property or services. 2006 tax return Reporting, Accrual method. 2006 tax return , Which Forms To Use Security deposit, Security deposits. 2006 tax return Services received from tenant, Property or services. 2006 tax return Uncollected rent, Uncollected rent. 2006 tax return Used as home, Rental of property also used as your home. 2006 tax return Rental losses, Exception for Rental Real Estate With Active Participation (see also Gains and losses) (see also Passive activity) Repairs, Types of Expenses, Repairs and Improvements (see also Improvements) Assessments for maintenance, Assessments for local improvements. 2006 tax return Personal use of rental property exception for days used for repairs and maintenance, Days used for repairs and maintenance. 2006 tax return S Sale of property Expenses, Vacant while listed for sale. 2006 tax return Gain or loss, Sale or exchange of rental property. 2006 tax return , How to report. 2006 tax return Main home, Sale of main home used as rental property. 2006 tax return Section 179 deductions, Section 179 deduction. 2006 tax return Security deposits, Security deposits. 2006 tax return Settlement fees, Settlement fees and other costs. 2006 tax return Shared equity financing agreements, Shared equity financing agreement. 2006 tax return Special depreciation allowances, Claiming the Special Depreciation Allowance Spouse Material participation, Participating spouse. 2006 tax return Standard mileage rates, Local transportation expenses. 2006 tax return Surveys, Settlement fees and other costs. 2006 tax return T Tables and figures Improvements, examples of (Table 1-1), Table 1-1. 2006 tax return Examples of Improvements MACRS optional tables (Table 2-2d), Table 2-2d. 2006 tax return MACRS optional tables (Tables 2-2a, 2-2b, and 2-2c), Tables 2-2a, 2-2b, and 2-2c. 2006 tax return MACRS recovery periods for property used in rental activities (Table 2-1), Table 2-1. 2006 tax return MACRS Recovery Periods for Property Used in Rental Activities Tax credits Residential energy credits, effect on basis, Decreases to basis. 2006 tax return Tax help, How To Get Tax Help Tax return preparation fees, Legal and other professional fees. 2006 tax return Taxes Deduction of, Types of Expenses Local benefit taxes, Local benefit taxes. 2006 tax return Real estate taxes, Real estate taxes. 2006 tax return Transfer taxes, Settlement fees and other costs. 2006 tax return Theft losses, Theft. 2006 tax return Title insurance, Settlement fees and other costs. 2006 tax return Transfer taxes, Settlement fees and other costs. 2006 tax return Travel and transportation expenses Local transportation expenses, Types of Expenses, Local transportation expenses. 2006 tax return Recordkeeping, Travel expenses. 2006 tax return Rental expenses, Types of Expenses Standard mileage rate, Local transportation expenses. 2006 tax return U Uncollected rent Income, Uncollected rent. 2006 tax return Use of home Before or after renting, Days used as a main home before or after renting. 2006 tax return Change to rental use, Property Changed to Rental Use Days of personal use, What is a day of personal use? Fair rental price, Fair rental price. 2006 tax return Passive activity rules exception, Exception for Personal Use of Dwelling Unit Personal use as dwelling unit, Personal Use of Dwelling Unit (Including Vacation Home) Utilities, Types of Expenses, Increases to basis. 2006 tax return V Vacant rental property, Vacant rental property. 2006 tax return Vacation homes Dwelling unit, Dwelling unit. 2006 tax return Fair rental price, Fair rental price. 2006 tax return Personal use of, Personal Use of Dwelling Unit (Including Vacation Home) Valuation Fair market value, Fair market value. 2006 tax return Prev  Up     Home   More Online Publications
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The 2006 Tax Return

2006 tax return Publication 957 - Main Content Table of Contents 1. 2006 tax return What is Back Pay?Reporting Back Pay Back Pay Under a Statute Nonstatutory Back Pay Format for Report to the SSA Questions 2. 2006 tax return Special Wage PaymentsReporting Special Wage Payments Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments Nonqualified Deferred Compensation and Section 457 Plans Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) PlansSpecial rule for box 11 of Form W-2 (distributions and deferral in the same year). 2006 tax return 1. 2006 tax return What is Back Pay? Back pay is pay received in a tax year(s) for actual or deemed employment in an earlier tax year(s). 2006 tax return For social security coverage and benefit purposes, all back pay, whether or not under a statute, is wages if it is payment for covered employment. 2006 tax return Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. 2006 tax return Report all back pay. 2006 tax return However, the tax year(s) for which back pay is credited as wages for social security purposes is different if it is awarded under a statute. 2006 tax return See Back Pay Under a Statute , later, for more information. 2006 tax return Reporting Back Pay The Internal Revenue Service (IRS) and the SSA consider back pay awards to be wages. 2006 tax return However, for income tax purposes, the IRS treats all back pay as wages in the year paid. 2006 tax return Employers should use Form W-2, Wage and Tax Statement, or electronic wage reports to report back pay as wages in the year they actually pay the employee. 2006 tax return The SSA no longer accepts reports on tapes, cartridges, and diskettes. 2006 tax return Example. 2006 tax return In 2012, Terry Morris earned wages of $50,000. 2006 tax return In the same year, she received $100,000 in settlement of a back pay case against her employer that covered the periods January 2007 through December 2011. 2006 tax return Her employer properly reflected social security wages of $110,100 and Medicare wages of $150,000 on her 2012 Form W-2. 2006 tax return However, if an employer did not include back pay wages on a previously filed Form W-2, magnetic media, or electronically filed wage report, the employer should prepare a wage correction report, Form W-2c, Corrected Wage and Tax Statement, or electronically filed report, to add the back pay award to the wages previously reported. 2006 tax return Example. 2006 tax return If, in the above example, Terry Morris' employer had prepared her 2012 Form W-2 reporting social security and Medicare wages of only $50,000 each, the employer would have to correct that report. 2006 tax return A Form W-2c correcting the 2012 Form W-2 would show previously reported social security and Medicare wages of $50,000 and the correct amount of $110,100 for social security wages and $150,000 for Medicare wages. 2006 tax return SSA treatment of back pay under a statute. 2006 tax return   Under the law, the SSA credits back pay awarded under a statute to an individual's earnings record in the period(s) the wages should have been paid. 2006 tax return This is important because wages not credited to the proper year may result in lower social security benefits or failure to meet the requirements for benefits. 2006 tax return   However, back pay under statute payments will remain posted to the employee's social security earnings record in the year reported on Form W-2 (or Form W-2c) unless the employer or employee notifies the SSA (in a separate, special report) of the back pay under a statute payment. 2006 tax return Then, the SSA can allocate the statutory back pay to the appropriate periods. 2006 tax return   If a back pay award is not made under a statute, the SSA credits back pay as wages in the year paid. 2006 tax return    If employers do notify the SSA of this payment, they should prepare a special report (with the information noted below) and send it to: Social Security Administration Attn: CPS Back Pay Staff 7-B-15 SWT 1500 Woodlawn Drive Baltimore, MD 21241-0001 Be sure to send this special report to the above address because the SSA handles it separately from other reports. 2006 tax return    If you paid the back pay award in the same tax year to which it applies, report the wages on that year's Form W-2. 2006 tax return No further action is necessary. 2006 tax return Example. 2006 tax return In 2012, Judy Wilson received a salary of $30,000 and a back pay under statute award of $2,000 for the period January through June 2012. 2006 tax return Her employer properly reported wages of $32,000 for social security and Medicare on her 2012 Form W-2. 2006 tax return No further action is necessary. 2006 tax return Information the SSA needs to properly credit back pay under a statute (special report). 2006 tax return   After you complete the special report, you or the employee should send it to the SSA when or after you submit the Form W-2 (on paper or electronically) to the SSA for the year you pay the statutory back pay to the employee. 2006 tax return There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. 2006 tax return The special report must include the following information. 2006 tax return The employer's name, address, and employer identification number (EIN). 2006 tax return A signed statement citing the federal or state statute under which the payment was made. 2006 tax return If the statute is not identified, the SSA will assume the payment was not under a statute and will not allocate to earlier period(s). 2006 tax return The name and telephone number of a person to contact. 2006 tax return The SSA may have additional questions concerning the back pay case or the individual employee's information. 2006 tax return A list of employees receiving the payment and the following information for each employee: The tax year you paid and reported the back pay. 2006 tax return The employee's social security number (SSN). 2006 tax return The employee's name (as shown on his or her social security card). 2006 tax return The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. 2006 tax return The period(s) the back pay award covers (beginning and ending dates—month and year). 2006 tax return The other wages paid subject to social security and/or Medicare taxes and reported in the same year as the back pay award (if none, show zero)*. 2006 tax return Do not include the back pay award shown in that wage report. 2006 tax return If you originally submitted the report under an establishment number, show that number and the amount of money that is to remain under that establishment number. 2006 tax return The amount to allocate to each reporting period*. 2006 tax return This includes any amount you want allocated (if applicable) to the tax year of the award payment. 2006 tax return If you do not give the SSA specific amounts to allocate, the SSA does the allocation by dividing the back pay award by the number of months or years covered by the award. 2006 tax return *Note. 2006 tax return   For periods before January 1, 1978 (before January 1, 1981, for state and local government employers covered by a Section 218 agreement), show the wage amounts for each calendar quarter ending March 31, June 30, September 30, and December 31. 2006 tax return For all tax years, show and identify the social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) separately. 2006 tax return MQGE is applicable to federal employees beginning in 1983, and for certain state and local government employees beginning in 1986. 2006 tax return For tax years 1991 and later, list the social security and Medicare wages separately. 2006 tax return If you originally reported the individual's wages under an establishment or payroll record unit number, show the amount of wages to remain in the award year for that number and furnish that number to the SSA along with the EIN. 2006 tax return Back Pay Under a Statute Back pay awarded under a statute is a payment by an employer following an award, determination, or agreement approved or sanctioned by a court or government agency responsible for enforcing a federal or state statute that protects an employee's right to employment or wages. 2006 tax return Examples of pertinent statutes include: Age Discrimination in Employment Act, Americans with Disabilities Act, Equal Pay Act, Fair Labor Standards Act, National Labor Relations Act, State minimum wage laws, and State statutes that protect rights to employment and wages. 2006 tax return Payments based on laws that have a similar effect to those listed above also may qualify as payments made under a statute. 2006 tax return Back pay awards, under some of the statutes listed above, may be compensation for personal injury and not pay for employment. 2006 tax return Such awards are not wages for social security coverage purposes. 2006 tax return If a court-approved or sanctioned settlement agreement states that the agreement is not an admission of discrimination, liability, or act of wrongdoing, the statement does not change the nature of a back pay award. 2006 tax return The payments made in such a settlement may still be back pay and wages under the rules discussed here. 2006 tax return Nonstatutory Back Pay A payment for back wages negotiated between an employer and employee without an award, determination, or agreement approved or sanctioned by a court or government agency, the payment is not made under a statute. 2006 tax return Delayed wage payments and retroactive pay increases resulting from union negotiation or payments under local ordinances or regulations are back pay and are wages. 2006 tax return However, they are not payments made under a statute. 2006 tax return If you are uncertain whether the back pay award was under a qualified statute, you may need to contact your personnel department or legal counsel or the attorney who filed the suit. 2006 tax return Format for Report to the SSA Use the format shown in Table 1, later, to send the SSA the information needed to properly credit back pay under a statute. 2006 tax return In a cover letter, include: Name and address of the employer, Statute under which you paid the back pay, Name and telephone number of the employer contact, and Signature of the reporting official. 2006 tax return Under certain circumstances, back pay may be a special wage payment and excluded from wages counted under the social security earnings test. 2006 tax return If you pay back pay to an employee age 61 or older, report it to the SSA in accordance with this section. 2006 tax return Read Special Wage Payments, later, for additional reporting instructions. 2006 tax return Questions If you have questions concerning back pay under a statute, call the SSA at 1-800-772-6270. 2006 tax return Exception. 2006 tax return   If you are a state or local government employer who was covered by an agreement under Section 218 of the Social Security Act before January 1, 1987, and you paid a back pay award before January 1, 1987, which you did not report to the SSA, contact your state Social Security Administrator's office. 2006 tax return Table 1. 2006 tax return Format for Report (Under Covering Letter) to Request SSA to Allocate Back Pay Under Statute Wages Employer's EIN: xx-xxxxxxx Tax Year in Which Award Payment Was Paid: 2012 (1) SSN and Employee Name (2)1 Award Amount and Period(s) (3)2,3 Other Soc. 2006 tax return Sec. 2006 tax return /Med. 2006 tax return Wages Paid In Award Year (4)3 Allocation     Soc. 2006 tax return Sec. 2006 tax return Med. 2006 tax return /MQGE Year Soc. 2006 tax return Sec. 2006 tax return Med. 2006 tax return /MQGE xxx-xx-xxxx HELEN T. 2006 tax return SMITH $100,000 1/2009 - 12/2012 $40,000 $40,000 2009 2010 2011 2012 $20,000 25,000 27,000 28,000 $20,000 25,000 27,000 28,000 xxx-xx-xxxx SAM W. 2006 tax return EVANS 30,000 7/89-12/91 -0- -0- 1989 1990 1991   6,000 12,000 12,000 xxx-xx-xxxx ROLAND S. 2006 tax return ADAMS 15,000 7/80-12/81 -0- -0- 9/80 12/80 1981 3,500 3,500 8,000   1Exclude amounts specifically designated as damages, penalties, etc. 2006 tax return  2Exclude the amount of back pay, if any, included in that amount. 2006 tax return  3For periods before January 1, 1978 (and for state and local government (Section 218) employers before January 1, 1981), show the wage amounts by calendar quarters. 2006 tax return The social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) must be shown separately FOR ALL YEARS. 2006 tax return (Wages subject ONLY to MQGE would be shown in the Medicare/MQGE column; no wages would be shown in the Soc. 2006 tax return Sec. 2006 tax return column. 2006 tax return ) For tax years 1991 and later, the social security and Medicare wages must be listed separately. 2006 tax return Explanation of examples. 2006 tax return Helen T. 2006 tax return Smith–The back pay award, excluding interest, was $100,000 for the periods 1/2009-12/2012. 2006 tax return In 2012, this employee was also paid $40,000 in other wages. 2006 tax return (Her Form W-2 for 2012 reported $110,100 for social security and $140,000 for Medicare. 2006 tax return The SSA allocation will result in adjusted posted wages of $68,000 for social security and $68,000 for Medicare for 2012. 2006 tax return ) Sam W. 2006 tax return Evans–The back pay award was $30,000 for the periods 7/89-12/91. 2006 tax return This employee was hired in 1989 and was subject to MQGE only. 2006 tax return He was no longer employed by this governmental employer in 2012. 2006 tax return (His Form W-2 for 2012 reported $30,000 for social security and $30,000 for Medicare. 2006 tax return After the SSA allocation, he will not have any net posted wages for 2012. 2006 tax return ) Roland S. 2006 tax return Adams–The back pay award was $15,000 for the periods 7/80-12/81. 2006 tax return He was no longer employed by this state and local government (Section 218) employer in 2012. 2006 tax return (His Form W-2 for 2012 reported $15,000 for social security and $15,000 for Medicare; after the SSA allocation, he will not have any net posted wages for 2012. 2006 tax return ) If the state Social Security Administrator's office needs more information, they can contact the SSA at the following address:   Social Security Administration Office of Income Security Programs Office of Earnings and Program Integrity Policy 6401 Security Boulevard 2506 OPS Baltimore, MD 21235 2. 2006 tax return Special Wage Payments A special wage payment (SWP) is an amount paid by an employer to an employee (or former employee) for services performed in a prior year. 2006 tax return Employers should report to the SSA special wage payments made to employees and former employees who are recipients of social security retirement benefits. 2006 tax return Special wage payments made to a retired employee receiving social security or to an employee who continues to work while receiving social security benefits may reduce the benefits the individual receives if not reported to the SSA. 2006 tax return Special wage payments may include (but are not limited to): Accumulated sick and vacation pay, Back pay, Bonuses, Deferred compensation, Payments because of retirement, Sales commissions, Severance pay, and Stock options. 2006 tax return Note. 2006 tax return Payments made after retirement that are part of the normal payroll cycle should not be routinely reported as special wage payments. 2006 tax return Earnings Test. 2006 tax return   Benefits paid to a social security beneficiary under full retirement age may be reduced if the beneficiary continues to work. 2006 tax return The SSA uses the information in boxes 1, 3, and 5 of Form W-2 to determine the beneficiary's current year earnings. 2006 tax return Special wage payments, which are for services performed in a prior year, will increase the current year earnings on Form W-2, which also may result in a reduction in the beneficiary's benefits. 2006 tax return If a benefit is reduced because of a special wage payment, the beneficiary must get documentation from the employer before the SSA can restore the deducted portion. 2006 tax return Therefore, employer reports of special wage payments help prevent incorrect benefit reductions. 2006 tax return Reporting Special Wage Payments Employers must report special wage payments for income tax purposes and social security and Medicare taxes in the year received. 2006 tax return Report income, social security, and/or Medicare taxes for special wage payments on Form W-2. 2006 tax return See Nonqualified Deferred Compensation and Section 457 Plans, later, for reporting nonqualified deferred compensation plan deferrals and payments on Form W-2. 2006 tax return In addition, report to the SSA special wage payments made during the reporting year to retired employees and employees who continue to work while receiving social security benefits. 2006 tax return Submit reports after the close of the tax year. 2006 tax return To avoid delays in processing, submit reports in time to reach the SSA by April 1. 2006 tax return Use one of the following reporting methods. 2006 tax return Electronic reporting. 2006 tax return   Special wage payment files can be sent electronically by logging onto Business Services Online (BSO) via the socialsecurity. 2006 tax return gov website. 2006 tax return BSO enables organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration. 2006 tax return You must register to use this website. 2006 tax return The web address is www. 2006 tax return socialsecurity. 2006 tax return gov/bso/bsowelcome. 2006 tax return htm. 2006 tax return   Use the specifications and record layout shown in  Table 2, later. 2006 tax return Only one file at a time may be submitted. 2006 tax return If your file is large (>10MB), or you have a slow internet connection, the transmission will be faster if the file is zipped. 2006 tax return A zipped file contains a file that has been compressed to reduce its file size. 2006 tax return WinZip and PKZIP are examples of acceptable compression packages. 2006 tax return   Electronic submissions not meeting the specifications in Table 2 will be rejected. 2006 tax return Paper listing. 2006 tax return   A paper listing can be used to report special wage payments to several employees. 2006 tax return Use the format shown in Table 3, later. 2006 tax return Submit paper listings to the local SSA office nearest your place of business. 2006 tax return Visit www. 2006 tax return socialsecurity. 2006 tax return gov/locator to find a Social Security office near you. 2006 tax return Form SSA-131. 2006 tax return   Use Form SSA-131 to report special wage payments made to an employee. 2006 tax return Also use this form to report nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in box 11 of Form W-2. 2006 tax return    This image is too large to be displayed in the current screen. 2006 tax return Please click the link to view the image. 2006 tax return Publication 957 Reporting Back Pay to the Social Security Administration Instructions for Form SSA–131   EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. 2006 tax return Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. 2006 tax return 2. 2006 tax return Enter the date the employee retired. 2006 tax return Enter “Not Retired” if the employee has not retired. 2006 tax return 3. 2006 tax return Enter the date that the employee last performed services; was not expected to return to work; and was not subject to recall to render additional services. 2006 tax return This date should be the same as or earlier than the date in item “2”. 2006 tax return Enter “Not Retired” if the employee has not retired. 2006 tax return 4. 2006 tax return Enter the wages that were paid to the employee in the tax year that were for services that were performed in years prior to the tax year or that were paid on account of retirement. 2006 tax return  Examples (not all inclusive) of payments to be included: Payments in lieu of vacation that were earned in a year prior to the tax year. 2006 tax return Accumulated sick payments which were paid in a lump sum based on “retirement” as the sole condition of payment. 2006 tax return Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year. 2006 tax return Payments “on account of retirement”–dismissal, severance or termination pay paid because of retirement. 2006 tax return Bonuses which are paid pursuant to a prior contract, agreement or promise causing the employee to expect such payments regularly; or announced to induce the employee to work more steadily, rapidly or efficiently or to remain with the employer. 2006 tax return Stock Options. 2006 tax return   Do not include in item “4” payments: For annual, sick, holiday, or vacation pay if used (absence from work) prior to the date of retirement (earlier of items “2” or “3”). 2006 tax return That were reported or will be reported under “Nonqualified Plans” on the Form W-2. 2006 tax return That were deducted from the employee's wages and paid to a deferred compensation plan (e. 2006 tax return g. 2006 tax return , 401k). 2006 tax return Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages). 2006 tax return Bonuses earned and paid in the tax year. 2006 tax return 5. 2006 tax return Check whether payments listed in item 4 will be made for years after the tax year. 2006 tax return If yes, please show the amounts and years in which these will be paid, if known. 2006 tax return 6. 2006 tax return Nonqualified deferred compensation and section 457 plans only. 2006 tax return If you were unable to report nonqualified deferred compensation or section 457 plan payments and deferrals (contributions) on Form W-2 because both payments and deferrals occurred during the year, show the amount of wages earned by the employee during the tax year. 2006 tax return Generally, the wages earned will be the compensation reported in block 1 of Form W-2 less payments from a nonqualified deferred compensation (or 457) plan, but including any amounts deferred under the plan during the tax year (See IRS Publication 957). 2006 tax return Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404. 2006 tax return 702. 2006 tax return The information that you provide will be used in making a determination regarding the amount of Social Security benefits payable to the above named individual. 2006 tax return While your response is voluntary, if you do not respond we may not be able to make a correct determination regarding the amount of Social Security benefits payable to the above named individual for the year in question. 2006 tax return We may also use the information you give us when we match records by computer. 2006 tax return Matching programs compare our records with those of other Federal, State, or local government agencies. 2006 tax return Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. 2006 tax return The law allows us to do this even if you do not agree to it. 2006 tax return Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. 2006 tax return If you want to learn more about this, contact any Social Security Office. 2006 tax return The Paperwork Reduction Act: This information collection meets the clearance requirements of 44 U. 2006 tax return S. 2006 tax return C. 2006 tax return §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. 2006 tax return You are not required to answer these questions unless we display a valid Office of Management and Budget control number. 2006 tax return We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. 2006 tax return Form SSA-131 (8-2001) EF (06-2002)   Submit Form SSA-131 to the SSA office nearest your place of business. 2006 tax return Or, the employee can submit it to the SSA office handling the claim. 2006 tax return You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. 2006 tax return If reporting on more than one employee, complete a separate Form SSA-131 for each employee or use the paper listing format (except for reporting nonqualified and section 457 plan deferrals and payments) in Table 3. 2006 tax return Do not report payments from nonqualified deferred compensation or section 457 plans that were reported in box 11 of Form W-2. 2006 tax return Use Form SSA-131 if deferrals to and payments from nonqualified or section 457 plans occurred during the tax year. 2006 tax return Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments A nonstatutory (nonqualified) option to purchase stock which is exercised in a year after the year in which the option was earned is a special wage payment. 2006 tax return It should not count for the social security earnings test. 2006 tax return Nonstatutory (nonqualified) options exercised as special wage payments by retired employees or employees who continue to work while receiving social security benefits should be reported by employers using the above reporting methods. 2006 tax return Nonqualified Deferred Compensation and Section 457 Plans A nonqualified deferred compensation plan is a plan or arrangement established and maintained by an employer for one or more of its employees that provides for the deferral of compensation, but does not meet the requirements for a tax-qualified deferred compensation plan. 2006 tax return For social security and Medicare purposes, deferred compensation plans for employees of state and local governments (section 457 plans) are treated the same as nonqualified plans. 2006 tax return Nonqualified and section 457 plans are reported differently than other special wage payments. 2006 tax return See Reporting Amounts Deferred to Nonqualified and Section 457 Plans below for specific instructions. 2006 tax return Reporting Amounts Deferred to Nonqualified and Section 457 Plans Generally, when the related services are performed, nonqualified deferred compensation is subject to social security and Medicare tax when deferred. 2006 tax return However, if nonqualified and section 457 plans contain provisions that delay the employee's right to receive payments from the plan, a period of substantial risk of forfeiture exists. 2006 tax return The plans' deferrals, or contributions, are not subject to social security and Medicare taxes until the period of substantial risk of forfeiture ends. 2006 tax return No risk of forfeiture. 2006 tax return   If there is no risk of forfeiture, report wage amounts deferred to a nonqualified deferred compensation or section 457 plan in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. 2006 tax return Example. 2006 tax return Company X's nonqualified deferred compensation plan allows the deferral of up to $20,000 of employee salaries each year. 2006 tax return The plan has no risk of forfeiture. 2006 tax return In 2012, Employee A defers $20,000 to the plan from a total salary of $200,000. 2006 tax return Form W-2 Completion Amount Box 1 $200,000 Box 3* 110,100 Box 5 200,000 *Wage base maximum for tax year 2012 Risk of forfeiture lapses before retirement. 2006 tax return   If the substantial risk of forfeiture lapses before the employee retires, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. 2006 tax return The accumulated deferrals are reported along with any other social security and Medicare wages earned during the year. 2006 tax return   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. 2006 tax return If the employee continues working, future deferrals are social security and Medicare wages when they are earned. 2006 tax return    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. 2006 tax return Risk of forfeiture lapses at retirement. 2006 tax return   When an employee's right to a payment is contingent upon working until retirement, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, as social security and/or Medicare wages in the year of retirement. 2006 tax return Add the amount to other wages paid in that year, and enter in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. 2006 tax return   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. 2006 tax return    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. 2006 tax return Example—risk of forfeiture. 2006 tax return At the end of the risk-of-forfeiture period for Company Y's nonqualified deferred compensation plan, Employee B's accumulated deferrals, plus interest earned by the plan, are $120,000, not including B's $20,000 deferral for this year. 2006 tax return B's wages, including this year's deferred amount, are $80,000. 2006 tax return Form W-2 Completion Amount Box 1 $60,000 Box 3* 110,100 Box 5 200,000 Box 11 120,000 *Wage base maximum for tax year 2012 Reporting Payments From Nonqualified and Nongovernmental Section 457 Plans When an employee or former employee retires and begins receiving payments (distributions) from a nonqualified or nongovernmental section 457 plan, report the payments in boxes 1 and 11 of Form W-2. 2006 tax return Report payments (distributions) from a governmental section 457 plan on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2006 tax return Example. 2006 tax return Employee D retired from the XYZ company and began receiving social security benefits. 2006 tax return XYZ paid D a $12,000 bonus upon retirement for sales made in a prior year, and D received $25,000 in payments from XYZ's nonqualified deferred compensation plan. 2006 tax return In addition, D agreed to continue performing services for XYZ, but on a part-time basis for wages of $15,000 per year. 2006 tax return D made no deferrals to the nonqualified plan this year. 2006 tax return Form W-2 Completion Amount Box 1 $52,000 Box 3 27,000 Box 5 27,000 Box 11 25,000 Report the $12,000 bonus to the SSA using electronic reporting, a paper listing, or Form SSA-131. 2006 tax return For more information, see Reporting Special Wage Payments , earlier. 2006 tax return Reporting Payments and Deferrals in the Same Year Do not complete box 11 when payments (distributions) are made from a nonqualified plan and deferrals are reported in boxes 3 and/or 5 of Form W-2 (including current year deferrals). 2006 tax return Report to the SSA on Form SSA-131 the total amount the employee earned during the tax year. 2006 tax return Normally, the amount earned is the amount reported in box 1 of Form W-2 less payments from a nonqualified or section 457 plan, but including any amounts deferred under the plan during the tax year. 2006 tax return See Form SSA-131 and its instructions, earlier. 2006 tax return Example. 2006 tax return Employee K retired this year from Company XYZ and began receiving social security benefits. 2006 tax return During the year he earned wages of $50,000 and deferred $35,000 of the wages into the company's nonqualified deferred compensation plan. 2006 tax return K also received $75,000 in payments from the company's nonqualified plan. 2006 tax return Form W-2 Completion Amount Special Wage Payment $75,000 Wages 50,000 Minus: deferral 35,000 Total reported in Box 1 $90,000     Wages including deferral reported in  Boxes 3 and 5 $50,000     Leave Box 11 blank. 2006 tax return File Form SSA-131 -0-     Form SSA-131 Completion Amount from Box 1 of Form W-2 $90,000 Minus: payments from a nonqualified plan 75,000 Plus: amounts deferred into the plan during the year 35,000 Total wages earned for purposes of Form SSA-131 (item 6) $50,000 Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) Plans It is not necessary to show amounts deferred during the year under an NQDC plan subject to section 409A. 2006 tax return If you report section 409A deferrals, show the amount in box 12 of Form W-2 using code Y. 2006 tax return For more information, see Notice 2008-115, 2008-52 I. 2006 tax return R. 2006 tax return B. 2006 tax return 1367, available at www. 2006 tax return irs. 2006 tax return gov/irb/2008-52_IRB/ar10. 2006 tax return html. 2006 tax return Special reporting rules apply when an NQDC plan is not compliant with section 409A (when there has been a “plan failure”). 2006 tax return Income included under section 409A from an NQDC plan is reported in box 1 and box 12 of Form W-2 using code Z. 2006 tax return See Notice 2008-115. 2006 tax return The following examples use small dollar amounts for illustrative purposes. 2006 tax return However, the amount reported in box 3 of Form W-2 is always limited by the social security earnings wage base (for example, $110,100 for 2012). 2006 tax return The term “vested” in the following examples means that the amount deferred is not subject to a substantial risk of forfeiture. 2006 tax return Conversely, the term “not vested” means that the amount deferred is subject to a substantial risk of forfeiture. 2006 tax return The examples assume that the NQDC plan is in compliance with section 409A, and that amounts deferred under the plan are not includible in gross income as they are deferred. 2006 tax return For purposes of the examples, it is assumed that the regular pay of the employee is remuneration for employment and wages for employment tax purposes except to the extent the deferral of a portion of the regular pay results in a reduction in wages. 2006 tax return Example 1: Deferral that is immediately vested (no substantial risk of forfeiture) with no distributions and no vesting of prior-year deferrals. 2006 tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into her employer’s NQDC plan. 2006 tax return The deferral of $20 was vested upon deferral and there was an employer match of $10 under the plan, which was also vested. 2006 tax return Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10. 2006 tax return Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 vested deferral) $180 Box 3 ($200 Regular pay plus $10 Employer match, vested) 210 Box 5 ($200 Regular pay plus $10 Employer match, vested) 210 Box 11 -0- Example 2: Deferral with delayed vesting (substantial risk of forfeiture) of employee and employer portions (no distributions and no vesting of prior-year deferrals). 2006 tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. 2006 tax return The deferral of $20 was not vested upon deferral, and there was an employer match of $10 under the plan, which was also not vested. 2006 tax return Regular pay = $200; Deferral, not vested = $20; Employer match, not vested = $10. 2006 tax return Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, not vested) $180 Box 3 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 5 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 11 -0- Example 3: Deferral that is immediately vested with prior-year deferrals and investment earnings on the prior-year deferrals that are now vesting (no distributions). 2006 tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. 2006 tax return The deferral of $20 was vested upon deferral. 2006 tax return During the year, $100 of prior-year deferrals and $15 of investment earnings on the $100 of prior-year deferrals became vested. 2006 tax return Regular pay = $200; Deferral, vested = $20; Vesting of prior-year deferrals = $100; Vesting of investment earnings on $100 of prior-year deferral = $15. 2006 tax return Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, vested) $180 Box 3 ($200 Regular pay plus $100 vested prior-year deferral plus $15 earnings on deferral) 315 Box 5 ($200 Regular pay plus $100 vested prior-year deferral plus $15 vested investment earnings on prior year deferral) 315 Box 11 ($100 vested prior-year deferral plus $15 earnings) 115 Example 4: No deferrals but there are distributions (no vesting of prior-year deferrals). 2006 tax return For the year, the employee’s regular pay was $100, and the employee deferred no pay into the employer’s NQDC plan. 2006 tax return There was no vesting of prior-year deferrals under the plan. 2006 tax return During the year, there were total distributions of $50 from the plan to the employee. 2006 tax return Regular pay = $100; Distribution = $50. 2006 tax return Form W-2 Completion Amount Box 1 ($100 Regular pay plus $50 Distribution) $150 Box 3 ($100 Regular pay ) 100 Box 5 ($100 Regular pay) 100 Box 11 ($50 Distribution) 50 Special rule for box 11 of Form W-2 (distributions and deferral in the same year). 2006 tax return   If, in the same year, there are NQDC distributions and there are deferrals that are reportable in boxes 3 and/or 5 (current or prior-year deferrals) of Form W-2, do not complete box 11. 2006 tax return Instead, report on Form SSA-131 the total amount the employee earned during the year. 2006 tax return * Submit the SSA-131 to the nearest SSA office or give it to the employee. 2006 tax return   *Generally, the amount earned by the employee during the tax year for purposes of item 6 of Form SSA-131 is the amount reported in box 1 of Form W-2 plus current-year deferrals that are vested (employee and employer portions) less distributions. 2006 tax return Do not consider prior-year deferrals that are vesting in the current year. 2006 tax return If there was a plan failure, the box 1 amount in this calculation should be as if there were no plan failure. 2006 tax return Example 5: Deferral that is immediately vested and there are distributions (no vesting of prior-year deferrals). 2006 tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. 2006 tax return There was also an employer match of $10. 2006 tax return The deferral and employer match were vested upon deferral. 2006 tax return There was no vesting of prior-year deferrals under the plan. 2006 tax return During the year, there were total distributions of $50 from the plan to the employee. 2006 tax return Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10; Distribution = $50. 2006 tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, vested) $230 Boxes 3 and 5 ($200 Regular pay plus $10 vested employer match) 210 Leave Box 11 blank. 2006 tax return File Form SSA-131 -0-     Form SSA-131 Completion Item 6 - amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $30 vested current year employee deferral and employer match) $210 Example 6: Deferral with delayed vesting and there are distributions (no vesting of prior-year deferrals). 2006 tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. 2006 tax return The deferral was not vested upon deferral. 2006 tax return There was no vesting of prior-year deferrals under the plan. 2006 tax return During the year, there were total distributions of $50 from the plan to the employee. 2006 tax return Regular pay = $200; Deferral, not vested = $20; Distribution = $50. 2006 tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay minus $20 deferral that is not vested) 180 Box 11 ($50 Distribution). 2006 tax return 50 Example 7: Deferral that is immediately vested and there are distributions (also vesting of prior-year deferrals and earnings on those prior-year deferrals). 2006 tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. 2006 tax return The deferral was vested upon deferral. 2006 tax return There was vesting of $100 of prior-year deferrals and $15 of earnings on the $100 prior-year deferral under the plan. 2006 tax return During the year, there were total distributions of $50 from the plan to the employee. 2006 tax return Regular pay = $200; Deferral, vested = $20; Distribution = $50; Vesting of prior-year deferrals ($100) and earnings on those prior-year deferrals ($15) = $115. 2006 tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 vested deferral $230 Boxes 3 and 5 ($200 Regular pay Plus $115 vested prior deferral (with vested earnings on the deferral)) 315 Leave Box 11 blank. 2006 tax return File Form SSA-131 -0-     Form SSA-131 Completion Item 6, amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $20 vested current year deferral) $200 Example 8: Deferral with delayed vesting and there are distributions (vesting of prior-year deferrals, including employer matches, and earnings on those deferrals). 2006 tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. 2006 tax return The deferral was not vested upon deferral. 2006 tax return There was also vesting of prior-year deferrals and employer matches and earnings on these amounts under the plan ($115). 2006 tax return During the year, there were total distributions of $50 from the plan to the employee. 2006 tax return Regular pay = $200; Deferral, not vested = $20; Distribution = $50; Vesting of prior-year deferrals and employer match = $100 plus earnings on that $100 of $15. 2006 tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay plus $115 vested prior-year deferral and prior year employer match and earning on the prior year amounts minus $20 deferral that is not vested) 295 Leave Box 11 blank. 2006 tax return File Form SSA-131 -0-     Form SSA-131 Completion Item 6 ($230 Amount from Box 1 of Form W-2 minus $50 Distribution) $180 Table 2. 2006 tax return Specifications for Electronic Reporting of Special Wage Payments Record Position  Field Size   Description Start End 1 3 3 Record Type—must include only the capital letters “SWP” 4 12 9 SSN—must be numeric and may not be all zeros 13 27 15 Last Name—all capitals and no punctuation; may have blanks on right only 28 38 11 First Name—all capitals and no punctuation; may have blanks on right only 39 39 1 Middle Initial—must be either a capital letter or blank 40 48 9 EIN—must be numeric and may not be all zeros 49 59 11 Payment—must be numeric; may not be all zeros; last two digits on right are assumed to be cents; no period or dollar sign 60 63 4 Payment Year—must be only a four-digit year 64 66 3 SSA Office Code—must be numeric and may be all zeros 67 67 1 Payment Type Code—must be the capital letter “T” 68 117 50 Filler  The record format is a fixed length of 117. 2006 tax return  The file format is ASCII. 2006 tax return  Submit only one file at a time. 2006 tax return   Table 3. 2006 tax return Sample—Paper Listing for Reporting Special Wage Payments to Several Employees Report of Special Wage PaymentsTax Year: Page of A. 2006 tax return Employer Name: EIN:   Address: Contact Name:     Phone: ( )   . 2006 tax return 1) B. 2006 tax return Employee Name: (Last) (First) (MI)   C. 2006 tax return SSN: D. 2006 tax return SWP:$ E. 2006 tax return Type: Other: 2) B. 2006 tax return Employee Name: (Last) (First) (MI)   C. 2006 tax return SSN: D. 2006 tax return SWP:$ E. 2006 tax return Type: Other: 3) B. 2006 tax return Employee Name: (Last) (First) (MI)   C. 2006 tax return SSN: D. 2006 tax return SWP:$ E. 2006 tax return Type: Other: 4) B. 2006 tax return Employee Name: (Last) (First) (MI)   C. 2006 tax return SSN: D. 2006 tax return SWP:$ E. 2006 tax return Type: Other: 5) B. 2006 tax return Employee Name: (Last) (First) (MI)   C. 2006 tax return SSN: D. 2006 tax return SWP:$ E. 2006 tax return Type: Other:     INSTRUCTIONS:   Enter tax year and page number. 2006 tax return   A. 2006 tax return Employer name, employer identification number (EIN), address, the name of a contact person, and a phone number where the contact person can be reached during normal business hours. 2006 tax return   B. 2006 tax return Employee's name. 2006 tax return   C. 2006 tax return Employee's social security number (SSN). 2006 tax return   D. 2006 tax return Total amount of special wage payments made to the employee. 2006 tax return   E. 2006 tax return Type of special wage payment from the following list: (1) Vacation Pay, (2) Sick Pay, (3) Severance Pay,  (4) Bonus, (5) Deferred Compensation, (6) Stock Options, and (7) Other—Please explain. 2006 tax return   Do not use a paper listing for nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in block 11 of Form W-2. 2006 tax return (Get Form SSA-131. 2006 tax return )                 Prev  Up  Next   Home   More Online Publications