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Form 1040 X

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Form 1040 X

Form 1040 x Publication 957 - Main Content Table of Contents 1. Form 1040 x What is Back Pay?Reporting Back Pay Back Pay Under a Statute Nonstatutory Back Pay Format for Report to the SSA Questions 2. Form 1040 x 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). Form 1040 x 1. Form 1040 x 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). Form 1040 x 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. Form 1040 x Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. Form 1040 x Report all back pay. Form 1040 x 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. Form 1040 x See Back Pay Under a Statute , later, for more information. Form 1040 x Reporting Back Pay The Internal Revenue Service (IRS) and the SSA consider back pay awards to be wages. Form 1040 x However, for income tax purposes, the IRS treats all back pay as wages in the year paid. Form 1040 x 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. Form 1040 x The SSA no longer accepts reports on tapes, cartridges, and diskettes. Form 1040 x Example. Form 1040 x In 2012, Terry Morris earned wages of $50,000. Form 1040 x 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. Form 1040 x Her employer properly reflected social security wages of $110,100 and Medicare wages of $150,000 on her 2012 Form W-2. Form 1040 x 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. Form 1040 x Example. Form 1040 x 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. Form 1040 x 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. Form 1040 x SSA treatment of back pay under a statute. Form 1040 x   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. Form 1040 x 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. Form 1040 x   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. Form 1040 x Then, the SSA can allocate the statutory back pay to the appropriate periods. Form 1040 x   If a back pay award is not made under a statute, the SSA credits back pay as wages in the year paid. Form 1040 x    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. Form 1040 x    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. Form 1040 x No further action is necessary. Form 1040 x Example. Form 1040 x 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. Form 1040 x Her employer properly reported wages of $32,000 for social security and Medicare on her 2012 Form W-2. Form 1040 x No further action is necessary. Form 1040 x Information the SSA needs to properly credit back pay under a statute (special report). Form 1040 x   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. Form 1040 x There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. Form 1040 x The special report must include the following information. Form 1040 x The employer's name, address, and employer identification number (EIN). Form 1040 x A signed statement citing the federal or state statute under which the payment was made. Form 1040 x 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). Form 1040 x The name and telephone number of a person to contact. Form 1040 x The SSA may have additional questions concerning the back pay case or the individual employee's information. Form 1040 x A list of employees receiving the payment and the following information for each employee: The tax year you paid and reported the back pay. Form 1040 x The employee's social security number (SSN). Form 1040 x The employee's name (as shown on his or her social security card). Form 1040 x The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. Form 1040 x The period(s) the back pay award covers (beginning and ending dates—month and year). Form 1040 x 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)*. Form 1040 x Do not include the back pay award shown in that wage report. Form 1040 x 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. Form 1040 x The amount to allocate to each reporting period*. Form 1040 x This includes any amount you want allocated (if applicable) to the tax year of the award payment. Form 1040 x 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. Form 1040 x *Note. Form 1040 x   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. Form 1040 x For all tax years, show and identify the social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) separately. Form 1040 x MQGE is applicable to federal employees beginning in 1983, and for certain state and local government employees beginning in 1986. Form 1040 x For tax years 1991 and later, list the social security and Medicare wages separately. Form 1040 x 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. Form 1040 x 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. Form 1040 x 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. Form 1040 x Payments based on laws that have a similar effect to those listed above also may qualify as payments made under a statute. Form 1040 x Back pay awards, under some of the statutes listed above, may be compensation for personal injury and not pay for employment. Form 1040 x Such awards are not wages for social security coverage purposes. Form 1040 x 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. Form 1040 x The payments made in such a settlement may still be back pay and wages under the rules discussed here. Form 1040 x 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. Form 1040 x Delayed wage payments and retroactive pay increases resulting from union negotiation or payments under local ordinances or regulations are back pay and are wages. Form 1040 x However, they are not payments made under a statute. Form 1040 x 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. Form 1040 x 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. Form 1040 x 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. Form 1040 x Under certain circumstances, back pay may be a special wage payment and excluded from wages counted under the social security earnings test. Form 1040 x If you pay back pay to an employee age 61 or older, report it to the SSA in accordance with this section. Form 1040 x Read Special Wage Payments, later, for additional reporting instructions. Form 1040 x Questions If you have questions concerning back pay under a statute, call the SSA at 1-800-772-6270. Form 1040 x Exception. Form 1040 x   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. Form 1040 x Table 1. Form 1040 x 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. Form 1040 x Sec. Form 1040 x /Med. Form 1040 x Wages Paid In Award Year (4)3 Allocation     Soc. Form 1040 x Sec. Form 1040 x Med. Form 1040 x /MQGE Year Soc. Form 1040 x Sec. Form 1040 x Med. Form 1040 x /MQGE xxx-xx-xxxx HELEN T. Form 1040 x 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. Form 1040 x EVANS 30,000 7/89-12/91 -0- -0- 1989 1990 1991   6,000 12,000 12,000 xxx-xx-xxxx ROLAND S. Form 1040 x 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. Form 1040 x  2Exclude the amount of back pay, if any, included in that amount. Form 1040 x  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. Form 1040 x The social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) must be shown separately FOR ALL YEARS. Form 1040 x (Wages subject ONLY to MQGE would be shown in the Medicare/MQGE column; no wages would be shown in the Soc. Form 1040 x Sec. Form 1040 x column. Form 1040 x ) For tax years 1991 and later, the social security and Medicare wages must be listed separately. Form 1040 x Explanation of examples. Form 1040 x Helen T. Form 1040 x Smith–The back pay award, excluding interest, was $100,000 for the periods 1/2009-12/2012. Form 1040 x In 2012, this employee was also paid $40,000 in other wages. Form 1040 x (Her Form W-2 for 2012 reported $110,100 for social security and $140,000 for Medicare. Form 1040 x The SSA allocation will result in adjusted posted wages of $68,000 for social security and $68,000 for Medicare for 2012. Form 1040 x ) Sam W. Form 1040 x Evans–The back pay award was $30,000 for the periods 7/89-12/91. Form 1040 x This employee was hired in 1989 and was subject to MQGE only. Form 1040 x He was no longer employed by this governmental employer in 2012. Form 1040 x (His Form W-2 for 2012 reported $30,000 for social security and $30,000 for Medicare. Form 1040 x After the SSA allocation, he will not have any net posted wages for 2012. Form 1040 x ) Roland S. Form 1040 x Adams–The back pay award was $15,000 for the periods 7/80-12/81. Form 1040 x He was no longer employed by this state and local government (Section 218) employer in 2012. Form 1040 x (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. Form 1040 x ) 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. Form 1040 x 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. Form 1040 x Employers should report to the SSA special wage payments made to employees and former employees who are recipients of social security retirement benefits. Form 1040 x 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. Form 1040 x 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. Form 1040 x Note. Form 1040 x Payments made after retirement that are part of the normal payroll cycle should not be routinely reported as special wage payments. Form 1040 x Earnings Test. Form 1040 x   Benefits paid to a social security beneficiary under full retirement age may be reduced if the beneficiary continues to work. Form 1040 x The SSA uses the information in boxes 1, 3, and 5 of Form W-2 to determine the beneficiary's current year earnings. Form 1040 x 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. Form 1040 x 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. Form 1040 x Therefore, employer reports of special wage payments help prevent incorrect benefit reductions. Form 1040 x Reporting Special Wage Payments Employers must report special wage payments for income tax purposes and social security and Medicare taxes in the year received. Form 1040 x Report income, social security, and/or Medicare taxes for special wage payments on Form W-2. Form 1040 x See Nonqualified Deferred Compensation and Section 457 Plans, later, for reporting nonqualified deferred compensation plan deferrals and payments on Form W-2. Form 1040 x 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. Form 1040 x Submit reports after the close of the tax year. Form 1040 x To avoid delays in processing, submit reports in time to reach the SSA by April 1. Form 1040 x Use one of the following reporting methods. Form 1040 x Electronic reporting. Form 1040 x   Special wage payment files can be sent electronically by logging onto Business Services Online (BSO) via the socialsecurity. Form 1040 x gov website. Form 1040 x BSO enables organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration. Form 1040 x You must register to use this website. Form 1040 x The web address is www. Form 1040 x socialsecurity. Form 1040 x gov/bso/bsowelcome. Form 1040 x htm. Form 1040 x   Use the specifications and record layout shown in  Table 2, later. Form 1040 x Only one file at a time may be submitted. Form 1040 x If your file is large (>10MB), or you have a slow internet connection, the transmission will be faster if the file is zipped. Form 1040 x A zipped file contains a file that has been compressed to reduce its file size. Form 1040 x WinZip and PKZIP are examples of acceptable compression packages. Form 1040 x   Electronic submissions not meeting the specifications in Table 2 will be rejected. Form 1040 x Paper listing. Form 1040 x   A paper listing can be used to report special wage payments to several employees. Form 1040 x Use the format shown in Table 3, later. Form 1040 x Submit paper listings to the local SSA office nearest your place of business. Form 1040 x Visit www. Form 1040 x socialsecurity. Form 1040 x gov/locator to find a Social Security office near you. Form 1040 x Form SSA-131. Form 1040 x   Use Form SSA-131 to report special wage payments made to an employee. Form 1040 x 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. Form 1040 x    This image is too large to be displayed in the current screen. Form 1040 x Please click the link to view the image. Form 1040 x Publication 957 Reporting Back Pay to the Social Security Administration Instructions for Form SSA–131   EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. Form 1040 x Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. Form 1040 x 2. Form 1040 x Enter the date the employee retired. Form 1040 x Enter “Not Retired” if the employee has not retired. Form 1040 x 3. Form 1040 x 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. Form 1040 x This date should be the same as or earlier than the date in item “2”. Form 1040 x Enter “Not Retired” if the employee has not retired. Form 1040 x 4. Form 1040 x 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. Form 1040 x  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. Form 1040 x Accumulated sick payments which were paid in a lump sum based on “retirement” as the sole condition of payment. Form 1040 x Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year. Form 1040 x Payments “on account of retirement”–dismissal, severance or termination pay paid because of retirement. Form 1040 x 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. Form 1040 x Stock Options. Form 1040 x   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”). Form 1040 x That were reported or will be reported under “Nonqualified Plans” on the Form W-2. Form 1040 x That were deducted from the employee's wages and paid to a deferred compensation plan (e. Form 1040 x g. Form 1040 x , 401k). Form 1040 x Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages). Form 1040 x Bonuses earned and paid in the tax year. Form 1040 x 5. Form 1040 x Check whether payments listed in item 4 will be made for years after the tax year. Form 1040 x If yes, please show the amounts and years in which these will be paid, if known. Form 1040 x 6. Form 1040 x Nonqualified deferred compensation and section 457 plans only. Form 1040 x 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. Form 1040 x 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). Form 1040 x Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404. Form 1040 x 702. Form 1040 x 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. Form 1040 x 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. Form 1040 x We may also use the information you give us when we match records by computer. Form 1040 x Matching programs compare our records with those of other Federal, State, or local government agencies. Form 1040 x Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. Form 1040 x The law allows us to do this even if you do not agree to it. Form 1040 x Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. Form 1040 x If you want to learn more about this, contact any Social Security Office. Form 1040 x The Paperwork Reduction Act: This information collection meets the clearance requirements of 44 U. Form 1040 x S. Form 1040 x C. Form 1040 x §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. Form 1040 x You are not required to answer these questions unless we display a valid Office of Management and Budget control number. Form 1040 x We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. Form 1040 x Form SSA-131 (8-2001) EF (06-2002)   Submit Form SSA-131 to the SSA office nearest your place of business. Form 1040 x Or, the employee can submit it to the SSA office handling the claim. Form 1040 x You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. Form 1040 x 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. Form 1040 x Do not report payments from nonqualified deferred compensation or section 457 plans that were reported in box 11 of Form W-2. Form 1040 x Use Form SSA-131 if deferrals to and payments from nonqualified or section 457 plans occurred during the tax year. Form 1040 x 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. Form 1040 x It should not count for the social security earnings test. Form 1040 x 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. Form 1040 x 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. Form 1040 x 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. Form 1040 x Nonqualified and section 457 plans are reported differently than other special wage payments. Form 1040 x See Reporting Amounts Deferred to Nonqualified and Section 457 Plans below for specific instructions. Form 1040 x 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. Form 1040 x 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. Form 1040 x The plans' deferrals, or contributions, are not subject to social security and Medicare taxes until the period of substantial risk of forfeiture ends. Form 1040 x No risk of forfeiture. Form 1040 x   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. Form 1040 x Example. Form 1040 x Company X's nonqualified deferred compensation plan allows the deferral of up to $20,000 of employee salaries each year. Form 1040 x The plan has no risk of forfeiture. Form 1040 x In 2012, Employee A defers $20,000 to the plan from a total salary of $200,000. Form 1040 x 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. Form 1040 x   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. Form 1040 x The accumulated deferrals are reported along with any other social security and Medicare wages earned during the year. Form 1040 x   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. Form 1040 x If the employee continues working, future deferrals are social security and Medicare wages when they are earned. Form 1040 x    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Form 1040 x Risk of forfeiture lapses at retirement. Form 1040 x   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. Form 1040 x 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. Form 1040 x   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. Form 1040 x    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Form 1040 x Example—risk of forfeiture. Form 1040 x 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. Form 1040 x B's wages, including this year's deferred amount, are $80,000. Form 1040 x 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. Form 1040 x 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. Form 1040 x Example. Form 1040 x Employee D retired from the XYZ company and began receiving social security benefits. Form 1040 x 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. Form 1040 x In addition, D agreed to continue performing services for XYZ, but on a part-time basis for wages of $15,000 per year. Form 1040 x D made no deferrals to the nonqualified plan this year. Form 1040 x 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. Form 1040 x For more information, see Reporting Special Wage Payments , earlier. Form 1040 x 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). Form 1040 x Report to the SSA on Form SSA-131 the total amount the employee earned during the tax year. Form 1040 x 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. Form 1040 x See Form SSA-131 and its instructions, earlier. Form 1040 x Example. Form 1040 x Employee K retired this year from Company XYZ and began receiving social security benefits. Form 1040 x During the year he earned wages of $50,000 and deferred $35,000 of the wages into the company's nonqualified deferred compensation plan. Form 1040 x K also received $75,000 in payments from the company's nonqualified plan. Form 1040 x 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. Form 1040 x 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. Form 1040 x If you report section 409A deferrals, show the amount in box 12 of Form W-2 using code Y. Form 1040 x For more information, see Notice 2008-115, 2008-52 I. Form 1040 x R. Form 1040 x B. Form 1040 x 1367, available at www. Form 1040 x irs. Form 1040 x gov/irb/2008-52_IRB/ar10. Form 1040 x html. Form 1040 x Special reporting rules apply when an NQDC plan is not compliant with section 409A (when there has been a “plan failure”). Form 1040 x Income included under section 409A from an NQDC plan is reported in box 1 and box 12 of Form W-2 using code Z. Form 1040 x See Notice 2008-115. Form 1040 x The following examples use small dollar amounts for illustrative purposes. Form 1040 x 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). Form 1040 x The term “vested” in the following examples means that the amount deferred is not subject to a substantial risk of forfeiture. Form 1040 x Conversely, the term “not vested” means that the amount deferred is subject to a substantial risk of forfeiture. Form 1040 x 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. Form 1040 x 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. Form 1040 x Example 1: Deferral that is immediately vested (no substantial risk of forfeiture) with no distributions and no vesting of prior-year deferrals. Form 1040 x For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into her employer’s NQDC plan. Form 1040 x The deferral of $20 was vested upon deferral and there was an employer match of $10 under the plan, which was also vested. Form 1040 x Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10. Form 1040 x 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). Form 1040 x 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. Form 1040 x 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. Form 1040 x Regular pay = $200; Deferral, not vested = $20; Employer match, not vested = $10. Form 1040 x 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). Form 1040 x 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. Form 1040 x The deferral of $20 was vested upon deferral. Form 1040 x During the year, $100 of prior-year deferrals and $15 of investment earnings on the $100 of prior-year deferrals became vested. Form 1040 x Regular pay = $200; Deferral, vested = $20; Vesting of prior-year deferrals = $100; Vesting of investment earnings on $100 of prior-year deferral = $15. Form 1040 x 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). Form 1040 x For the year, the employee’s regular pay was $100, and the employee deferred no pay into the employer’s NQDC plan. Form 1040 x There was no vesting of prior-year deferrals under the plan. Form 1040 x During the year, there were total distributions of $50 from the plan to the employee. Form 1040 x Regular pay = $100; Distribution = $50. Form 1040 x 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). Form 1040 x   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. Form 1040 x Instead, report on Form SSA-131 the total amount the employee earned during the year. Form 1040 x * Submit the SSA-131 to the nearest SSA office or give it to the employee. Form 1040 x   *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. Form 1040 x Do not consider prior-year deferrals that are vesting in the current year. Form 1040 x If there was a plan failure, the box 1 amount in this calculation should be as if there were no plan failure. Form 1040 x Example 5: Deferral that is immediately vested and there are distributions (no vesting of prior-year deferrals). Form 1040 x For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Form 1040 x There was also an employer match of $10. Form 1040 x The deferral and employer match were vested upon deferral. Form 1040 x There was no vesting of prior-year deferrals under the plan. Form 1040 x During the year, there were total distributions of $50 from the plan to the employee. Form 1040 x Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10; Distribution = $50. Form 1040 x 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. Form 1040 x 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). Form 1040 x For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Form 1040 x The deferral was not vested upon deferral. Form 1040 x There was no vesting of prior-year deferrals under the plan. Form 1040 x During the year, there were total distributions of $50 from the plan to the employee. Form 1040 x Regular pay = $200; Deferral, not vested = $20; Distribution = $50. Form 1040 x 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). Form 1040 x 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). Form 1040 x For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Form 1040 x The deferral was vested upon deferral. Form 1040 x There was vesting of $100 of prior-year deferrals and $15 of earnings on the $100 prior-year deferral under the plan. Form 1040 x During the year, there were total distributions of $50 from the plan to the employee. Form 1040 x Regular pay = $200; Deferral, vested = $20; Distribution = $50; Vesting of prior-year deferrals ($100) and earnings on those prior-year deferrals ($15) = $115. Form 1040 x 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. Form 1040 x 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). Form 1040 x For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Form 1040 x The deferral was not vested upon deferral. Form 1040 x There was also vesting of prior-year deferrals and employer matches and earnings on these amounts under the plan ($115). Form 1040 x During the year, there were total distributions of $50 from the plan to the employee. Form 1040 x 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. Form 1040 x 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. Form 1040 x File Form SSA-131 -0-     Form SSA-131 Completion Item 6 ($230 Amount from Box 1 of Form W-2 minus $50 Distribution) $180 Table 2. Form 1040 x Specifications for Electronic Reporting of Special Wage Payments Record Position  Field Size   Description Start End 1 3 3 Record Type—must include only the capital letters “SWP” 4 12 9 SSN—must be numeric and may not be all zeros 13 27 15 Last Name—all capitals and no punctuation; may have blanks on right only 28 38 11 First Name—all capitals and no punctuation; may have blanks on right only 39 39 1 Middle Initial—must be either a capital letter or blank 40 48 9 EIN—must be numeric and may not be all zeros 49 59 11 Payment—must be numeric; may not be all zeros; last two digits on right are assumed to be cents; no period or dollar sign 60 63 4 Payment Year—must be only a four-digit year 64 66 3 SSA Office Code—must be numeric and may be all zeros 67 67 1 Payment Type Code—must be the capital letter “T” 68 117 50 Filler  The record format is a fixed length of 117. Form 1040 x  The file format is ASCII. Form 1040 x  Submit only one file at a time. Form 1040 x   Table 3. Form 1040 x Sample—Paper Listing for Reporting Special Wage Payments to Several Employees Report of Special Wage PaymentsTax Year: Page of A. Form 1040 x Employer Name: EIN:   Address: Contact Name:     Phone: ( )   . Form 1040 x 1) B. Form 1040 x Employee Name: (Last) (First) (MI)   C. Form 1040 x SSN: D. Form 1040 x SWP:$ E. Form 1040 x Type: Other: 2) B. Form 1040 x Employee Name: (Last) (First) (MI)   C. Form 1040 x SSN: D. Form 1040 x SWP:$ E. Form 1040 x Type: Other: 3) B. Form 1040 x Employee Name: (Last) (First) (MI)   C. Form 1040 x SSN: D. Form 1040 x SWP:$ E. Form 1040 x Type: Other: 4) B. Form 1040 x Employee Name: (Last) (First) (MI)   C. Form 1040 x SSN: D. Form 1040 x SWP:$ E. Form 1040 x Type: Other: 5) B. Form 1040 x Employee Name: (Last) (First) (MI)   C. Form 1040 x SSN: D. Form 1040 x SWP:$ E. Form 1040 x Type: Other:     INSTRUCTIONS:   Enter tax year and page number. Form 1040 x   A. Form 1040 x 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. Form 1040 x   B. Form 1040 x Employee's name. Form 1040 x   C. Form 1040 x Employee's social security number (SSN). Form 1040 x   D. Form 1040 x Total amount of special wage payments made to the employee. Form 1040 x   E. Form 1040 x 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. Form 1040 x   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. Form 1040 x (Get Form SSA-131. Form 1040 x )                 Prev  Up  Next   Home   More Online Publications
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The Form 1040 X

Form 1040 x Publication 560 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionSEP plans. Form 1040 x SIMPLE plans. Form 1040 x Qualified plans. Form 1040 x Ordering forms and publications. Form 1040 x Tax questions. Form 1040 x Future Developments For the latest information about developments related to Publication 560, such as legislation enacted after we release it, go to www. Form 1040 x irs. Form 1040 x gov/pub560. Form 1040 x What's New Compensation limit increased for 2013 and 2014. Form 1040 x  For 2013 the maximum compensation used for figuring contributions and benefits increases to $255,000. Form 1040 x This limit increases to $260,000 for 2014. Form 1040 x Elective deferral limit for 2013 and 2014. Form 1040 x  The limit on elective deferrals, other than catch-up contributions, increases to $17,500 for 2013 and remains at $17,500 for 2014. Form 1040 x These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), section 403(b) plans and section 457(b) plans. Form 1040 x Defined contribution limit increased for 2013 and 2014. Form 1040 x  The limit on contributions, other than catch-up contributions, for a participant in a defined contribution plan increases to $51,000 for 2013. Form 1040 x This limit increases to $52,000 for 2014. Form 1040 x SIMPLE plan salary reduction contribution limit for 2013 and 2014. Form 1040 x  The limit on salary reduction contributions, other than catch-up contributions, increases to $12,000 for 2013 and remains at $12,000 for 2014. Form 1040 x Catch-up contribution limit remains unchanged for 2013 and 2014. Form 1040 x  A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. Form 1040 x The catch-up contribution limitation for defined contribution plans other than SIMPLE plans remains unchanged at $5,500 for 2013 and 2014. Form 1040 x The catch-up contribution limitation for SIMPLE plans remains unchanged at $2,500 for 2013 and 2014. Form 1040 x The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. Form 1040 x The catch-up contribution limit. Form 1040 x The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Form 1040 x See “Catch-up contributions” under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information. Form 1040 x All section references are to the Internal Revenue Code, unless otherwise stated. Form 1040 x Reminders In-plan Roth rollovers. Form 1040 x  Section 402A(c)(4) provides for a distribution from an individual's account in a 401(k) plan, other than from a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. Form 1040 x An in-plan Roth rollover is not treated as a distribution for most purposes. Form 1040 x Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. Form 1040 x For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Form 1040 x R. Form 1040 x B. Form 1040 x 872, available at  www. Form 1040 x irs. Form 1040 x gov/irb/2010-51_IRB/ar11. Form 1040 x html. Form 1040 x In-plan Roth rollovers expanded. Form 1040 x  Beginning in 2013, a plan with designated Roth accounts can permit a participant to roll over amounts into a designated Roth account from his or her other accounts in the same plan, regardless of whether the participant is eligible for a distribution from the other accounts. Form 1040 x Section 402A(c)(4) was amended by the American Taxpayer Relief Act of 2012. Form 1040 x For more information, see Notice 2013-74, 2013-52 I. Form 1040 x R. Form 1040 x B. Form 1040 x 819, available at www. Form 1040 x irs. Form 1040 x gov/irb/2013-52_IRB/ar11. Form 1040 x html. Form 1040 x Credit for startup costs. Form 1040 x  You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. Form 1040 x The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. Form 1040 x You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective. Form 1040 x You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. Form 1040 x At least one participant must be a non-highly compensated employee. Form 1040 x The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies. Form 1040 x You. Form 1040 x A member of a controlled group that includes you. Form 1040 x A predecessor of (1) or (2). Form 1040 x The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. Form 1040 x However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. Form 1040 x You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year. Form 1040 x To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs. Form 1040 x Retirement savings contributions credit. Form 1040 x  Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. Form 1040 x The maximum contribution eligible for the credit is $2,000. Form 1040 x To take the credit, use Form 8880, Credit for Qualified Retirement Savings Contributions. Form 1040 x For more information on who is eligible for the credit, retirement plan contributions eligible for the credit and how to figure the credit, see Form 8880 and its instructions or go to the IRS website and search Retirement Topics-Retirement Savings Contributions Credit (Saver's Credit). Form 1040 x Photographs of missing children. Form 1040 x  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Form 1040 x Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Form 1040 x You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Form 1040 x Introduction This publication discusses retirement plans you can set up and maintain for yourself and your employees. Form 1040 x In this publication, “you” refers to the employer. Form 1040 x See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. Form 1040 x This publication covers the following types of retirement plans. Form 1040 x SEP (simplified employee pension) plans. Form 1040 x SIMPLE (savings incentive match plan for employees) plans. Form 1040 x Qualified plans (also called H. Form 1040 x R. Form 1040 x 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans. Form 1040 x SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. Form 1040 x You can deduct contributions you make to the plan for your employees. Form 1040 x If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. Form 1040 x You can also deduct trustees' fees if contributions to the plan do not cover them. Form 1040 x Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Form 1040 x Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. Form 1040 x These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free. Form 1040 x What this publication covers. Form 1040 x   This publication contains the information you need to understand the following topics. Form 1040 x What type of plan to set up. Form 1040 x How to set up a plan. Form 1040 x How much you can contribute to a plan. Form 1040 x How much of your contribution is deductible. Form 1040 x How to treat certain distributions. Form 1040 x How to report information about the plan to the IRS and your employees. Form 1040 x Basic features of SEP, SIMPLE, and qualified plans. Form 1040 x The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1. Form 1040 x SEP plans. Form 1040 x   SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. Form 1040 x Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee. Form 1040 x SIMPLE plans. Form 1040 x   Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. Form 1040 x Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. Form 1040 x In addition, you will contribute matching or nonelective contributions. Form 1040 x The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan. Form 1040 x Qualified plans. Form 1040 x   The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. Form 1040 x However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases. Form 1040 x Table 1. Form 1040 x Key Retirement Plan Rules for 2013 Type  of  Plan Last Date for Contribution Maximum Contribution Maximum Deduction When To Set Up Plan SEP Due date of employer's return (including extensions). Form 1040 x Smaller of $51,000 or 25%1 of participant's compensation. Form 1040 x 2 25%1 of all participants' compensation. Form 1040 x 2 Any time up to the due date of employer's return (including extensions). Form 1040 x SIMPLE IRA and SIMPLE 401(k) Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made. Form 1040 x 4  Matching or nonelective contributions: Due date of employer's return (including extensions). Form 1040 x Employee contribution: Salary reduction contribution up to $12,000, $14,500 if age 50 or over. Form 1040 x   Employer contribution:  Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation. Form 1040 x 2 Same as maximum contribution. Form 1040 x Any time between 1/1 and 10/1 of the calendar year. Form 1040 x   For a new employer coming into existence after 10/1, as soon as administratively feasible. Form 1040 x Qualified Plan: Defined Contribution Plan  Elective deferral: Due date of employer's return (including extensions). Form 1040 x 4   Employer contribution: Money Purchase or Profit-Sharing: Due date of employer's return (including extensions). Form 1040 x  Employee contribution: Elective deferral up to $17,500, $23,000 if age 50 or over. Form 1040 x   Employer contribution: Money Purchase: Smaller of $51,000 or 100%1 of participant's compensation. Form 1040 x 2  Profit-Sharing: Smaller of $51,000 or 100%1 of participant's compensation. Form 1040 x 2  25%1 of all participants' compensation2, plus amount of elective deferrals made. Form 1040 x   By the end of the tax year. Form 1040 x Qualified Plan: Defined Benefit Plan Contributions generally must be paid in quarterly installments, due 15 days after the end of each quarter. Form 1040 x See Minimum Funding Requirement in chapter 4. Form 1040 x Amount needed to provide an annual benefit no larger than the smaller of $205,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Form 1040 x Based on actuarial assumptions and computations. Form 1040 x By the end of the tax year. Form 1040 x 1Net earnings from self-employment must take the contribution into account. Form 1040 x See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 . Form 1040 x  2Compensation is generally limited to $255,000 in 2013. Form 1040 x  3Under a SIMPLE 401(k) plan, compensation is generally limited to $255,000 in 2013. Form 1040 x  4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals. Form 1040 x What this publication does not cover. Form 1040 x   Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. Form 1040 x You may also need professional help and guidance. Form 1040 x   Also, this publication does not cover all the rules that may be of interest to employees. Form 1040 x For example, it does not cover the following topics. Form 1040 x The comprehensive IRA rules an employee needs to know. Form 1040 x These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs). Form 1040 x The comprehensive rules that apply to distributions from retirement plans. Form 1040 x These rules are covered in Publication 575, Pension and Annuity Income. Form 1040 x The comprehensive rules that apply to section 403(b) plans. Form 1040 x These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). Form 1040 x Comments and suggestions. Form 1040 x   We welcome your comments about this publication and your suggestions for future editions. Form 1040 x   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Form 1040 x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Form 1040 x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Form 1040 x   You can send your comments from www. Form 1040 x irs. Form 1040 x gov/formspubs. Form 1040 x Click on “More Information” and then on “Give us feedback. Form 1040 x ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Form 1040 x Ordering forms and publications. Form 1040 x   Visit www. Form 1040 x irs. Form 1040 x gov/formspubs to download forms  and publications, call 1-800-TAX-FORM  (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Form 1040 x Internal Revenue Service 1201 N. Form 1040 x Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Form 1040 x   If you have a tax question, check the information available on IRS. Form 1040 x gov or call 1-800-829-1040. Form 1040 x We cannot answer tax questions sent to either of the above addresses. Form 1040 x Note. Form 1040 x Forms filed electronically with the Department of Labor are not available on the IRS website. Form 1040 x Instead, see www. Form 1040 x efast. Form 1040 x dol. Form 1040 x gov. Form 1040 x Prev  Up  Next   Home   More Online Publications