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How do you amend your taxes Publication 957 - Main Content Table of Contents 1. How do you amend your taxes What is Back Pay?Reporting Back Pay Back Pay Under a Statute Nonstatutory Back Pay Format for Report to the SSA Questions 2. How do you amend your taxes 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). How do you amend your taxes 1. How do you amend your taxes 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). How do you amend your taxes 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. How do you amend your taxes Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. How do you amend your taxes Report all back pay. How do you amend your taxes 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. How do you amend your taxes See Back Pay Under a Statute , later, for more information. How do you amend your taxes Reporting Back Pay The Internal Revenue Service (IRS) and the SSA consider back pay awards to be wages. How do you amend your taxes However, for income tax purposes, the IRS treats all back pay as wages in the year paid. How do you amend your taxes 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. How do you amend your taxes The SSA no longer accepts reports on tapes, cartridges, and diskettes. How do you amend your taxes Example. How do you amend your taxes In 2012, Terry Morris earned wages of $50,000. How do you amend your taxes 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. How do you amend your taxes Her employer properly reflected social security wages of $110,100 and Medicare wages of $150,000 on her 2012 Form W-2. How do you amend your taxes 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. How do you amend your taxes Example. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes SSA treatment of back pay under a statute. How do you amend your taxes   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. How do you amend your taxes 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. How do you amend your taxes   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. How do you amend your taxes Then, the SSA can allocate the statutory back pay to the appropriate periods. How do you amend your taxes   If a back pay award is not made under a statute, the SSA credits back pay as wages in the year paid. How do you amend your taxes    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. How do you amend your taxes    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. How do you amend your taxes No further action is necessary. How do you amend your taxes Example. How do you amend your taxes 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. How do you amend your taxes Her employer properly reported wages of $32,000 for social security and Medicare on her 2012 Form W-2. How do you amend your taxes No further action is necessary. How do you amend your taxes Information the SSA needs to properly credit back pay under a statute (special report). How do you amend your taxes   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. How do you amend your taxes There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. How do you amend your taxes The special report must include the following information. How do you amend your taxes The employer's name, address, and employer identification number (EIN). How do you amend your taxes A signed statement citing the federal or state statute under which the payment was made. How do you amend your taxes 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). How do you amend your taxes The name and telephone number of a person to contact. How do you amend your taxes The SSA may have additional questions concerning the back pay case or the individual employee's information. How do you amend your taxes A list of employees receiving the payment and the following information for each employee: The tax year you paid and reported the back pay. How do you amend your taxes The employee's social security number (SSN). How do you amend your taxes The employee's name (as shown on his or her social security card). How do you amend your taxes The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. How do you amend your taxes The period(s) the back pay award covers (beginning and ending dates—month and year). How do you amend your taxes 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)*. How do you amend your taxes Do not include the back pay award shown in that wage report. How do you amend your taxes 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. How do you amend your taxes The amount to allocate to each reporting period*. How do you amend your taxes This includes any amount you want allocated (if applicable) to the tax year of the award payment. How do you amend your taxes 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. How do you amend your taxes *Note. How do you amend your taxes   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. How do you amend your taxes For all tax years, show and identify the social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) separately. How do you amend your taxes MQGE is applicable to federal employees beginning in 1983, and for certain state and local government employees beginning in 1986. How do you amend your taxes For tax years 1991 and later, list the social security and Medicare wages separately. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Payments based on laws that have a similar effect to those listed above also may qualify as payments made under a statute. How do you amend your taxes Back pay awards, under some of the statutes listed above, may be compensation for personal injury and not pay for employment. How do you amend your taxes Such awards are not wages for social security coverage purposes. How do you amend your taxes 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. How do you amend your taxes The payments made in such a settlement may still be back pay and wages under the rules discussed here. How do you amend your taxes 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. How do you amend your taxes Delayed wage payments and retroactive pay increases resulting from union negotiation or payments under local ordinances or regulations are back pay and are wages. How do you amend your taxes However, they are not payments made under a statute. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Under certain circumstances, back pay may be a special wage payment and excluded from wages counted under the social security earnings test. How do you amend your taxes If you pay back pay to an employee age 61 or older, report it to the SSA in accordance with this section. How do you amend your taxes Read Special Wage Payments, later, for additional reporting instructions. How do you amend your taxes Questions If you have questions concerning back pay under a statute, call the SSA at 1-800-772-6270. How do you amend your taxes Exception. How do you amend your taxes   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. How do you amend your taxes Table 1. How do you amend your taxes 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. How do you amend your taxes Sec. How do you amend your taxes /Med. How do you amend your taxes Wages Paid In Award Year (4)3 Allocation     Soc. How do you amend your taxes Sec. How do you amend your taxes Med. How do you amend your taxes /MQGE Year Soc. How do you amend your taxes Sec. How do you amend your taxes Med. How do you amend your taxes /MQGE xxx-xx-xxxx HELEN T. How do you amend your taxes 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. How do you amend your taxes EVANS 30,000 7/89-12/91 -0- -0- 1989 1990 1991   6,000 12,000 12,000 xxx-xx-xxxx ROLAND S. How do you amend your taxes 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. How do you amend your taxes  2Exclude the amount of back pay, if any, included in that amount. How do you amend your taxes  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. How do you amend your taxes The social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) must be shown separately FOR ALL YEARS. How do you amend your taxes (Wages subject ONLY to MQGE would be shown in the Medicare/MQGE column; no wages would be shown in the Soc. How do you amend your taxes Sec. How do you amend your taxes column. How do you amend your taxes ) For tax years 1991 and later, the social security and Medicare wages must be listed separately. How do you amend your taxes Explanation of examples. How do you amend your taxes Helen T. How do you amend your taxes Smith–The back pay award, excluding interest, was $100,000 for the periods 1/2009-12/2012. How do you amend your taxes In 2012, this employee was also paid $40,000 in other wages. How do you amend your taxes (Her Form W-2 for 2012 reported $110,100 for social security and $140,000 for Medicare. How do you amend your taxes The SSA allocation will result in adjusted posted wages of $68,000 for social security and $68,000 for Medicare for 2012. How do you amend your taxes ) Sam W. How do you amend your taxes Evans–The back pay award was $30,000 for the periods 7/89-12/91. How do you amend your taxes This employee was hired in 1989 and was subject to MQGE only. How do you amend your taxes He was no longer employed by this governmental employer in 2012. How do you amend your taxes (His Form W-2 for 2012 reported $30,000 for social security and $30,000 for Medicare. How do you amend your taxes After the SSA allocation, he will not have any net posted wages for 2012. How do you amend your taxes ) Roland S. How do you amend your taxes Adams–The back pay award was $15,000 for the periods 7/80-12/81. How do you amend your taxes He was no longer employed by this state and local government (Section 218) employer in 2012. How do you amend your taxes (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. How do you amend your taxes ) 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. How do you amend your taxes 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. How do you amend your taxes Employers should report to the SSA special wage payments made to employees and former employees who are recipients of social security retirement benefits. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Note. How do you amend your taxes Payments made after retirement that are part of the normal payroll cycle should not be routinely reported as special wage payments. How do you amend your taxes Earnings Test. How do you amend your taxes   Benefits paid to a social security beneficiary under full retirement age may be reduced if the beneficiary continues to work. How do you amend your taxes The SSA uses the information in boxes 1, 3, and 5 of Form W-2 to determine the beneficiary's current year earnings. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Therefore, employer reports of special wage payments help prevent incorrect benefit reductions. How do you amend your taxes Reporting Special Wage Payments Employers must report special wage payments for income tax purposes and social security and Medicare taxes in the year received. How do you amend your taxes Report income, social security, and/or Medicare taxes for special wage payments on Form W-2. How do you amend your taxes See Nonqualified Deferred Compensation and Section 457 Plans, later, for reporting nonqualified deferred compensation plan deferrals and payments on Form W-2. How do you amend your taxes 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. How do you amend your taxes Submit reports after the close of the tax year. How do you amend your taxes To avoid delays in processing, submit reports in time to reach the SSA by April 1. How do you amend your taxes Use one of the following reporting methods. How do you amend your taxes Electronic reporting. How do you amend your taxes   Special wage payment files can be sent electronically by logging onto Business Services Online (BSO) via the socialsecurity. How do you amend your taxes gov website. How do you amend your taxes BSO enables organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration. How do you amend your taxes You must register to use this website. How do you amend your taxes The web address is www. How do you amend your taxes socialsecurity. How do you amend your taxes gov/bso/bsowelcome. How do you amend your taxes htm. How do you amend your taxes   Use the specifications and record layout shown in  Table 2, later. How do you amend your taxes Only one file at a time may be submitted. How do you amend your taxes If your file is large (>10MB), or you have a slow internet connection, the transmission will be faster if the file is zipped. How do you amend your taxes A zipped file contains a file that has been compressed to reduce its file size. How do you amend your taxes WinZip and PKZIP are examples of acceptable compression packages. How do you amend your taxes   Electronic submissions not meeting the specifications in Table 2 will be rejected. How do you amend your taxes Paper listing. How do you amend your taxes   A paper listing can be used to report special wage payments to several employees. How do you amend your taxes Use the format shown in Table 3, later. How do you amend your taxes Submit paper listings to the local SSA office nearest your place of business. How do you amend your taxes Visit www. How do you amend your taxes socialsecurity. How do you amend your taxes gov/locator to find a Social Security office near you. How do you amend your taxes Form SSA-131. How do you amend your taxes   Use Form SSA-131 to report special wage payments made to an employee. How do you amend your taxes 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. How do you amend your taxes    This image is too large to be displayed in the current screen. How do you amend your taxes Please click the link to view the image. How do you amend your taxes Publication 957 Reporting Back Pay to the Social Security Administration Instructions for Form SSA–131   EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. How do you amend your taxes Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. How do you amend your taxes 2. How do you amend your taxes Enter the date the employee retired. How do you amend your taxes Enter “Not Retired” if the employee has not retired. How do you amend your taxes 3. How do you amend your taxes 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. How do you amend your taxes This date should be the same as or earlier than the date in item “2”. How do you amend your taxes Enter “Not Retired” if the employee has not retired. How do you amend your taxes 4. How do you amend your taxes 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. How do you amend your taxes  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. How do you amend your taxes Accumulated sick payments which were paid in a lump sum based on “retirement” as the sole condition of payment. How do you amend your taxes Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year. How do you amend your taxes Payments “on account of retirement”–dismissal, severance or termination pay paid because of retirement. How do you amend your taxes 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. How do you amend your taxes Stock Options. How do you amend your taxes   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”). How do you amend your taxes That were reported or will be reported under “Nonqualified Plans” on the Form W-2. How do you amend your taxes That were deducted from the employee's wages and paid to a deferred compensation plan (e. How do you amend your taxes g. How do you amend your taxes , 401k). How do you amend your taxes Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages). How do you amend your taxes Bonuses earned and paid in the tax year. How do you amend your taxes 5. How do you amend your taxes Check whether payments listed in item 4 will be made for years after the tax year. How do you amend your taxes If yes, please show the amounts and years in which these will be paid, if known. How do you amend your taxes 6. How do you amend your taxes Nonqualified deferred compensation and section 457 plans only. How do you amend your taxes 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. How do you amend your taxes 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). How do you amend your taxes Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404. How do you amend your taxes 702. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes We may also use the information you give us when we match records by computer. How do you amend your taxes Matching programs compare our records with those of other Federal, State, or local government agencies. How do you amend your taxes Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. How do you amend your taxes The law allows us to do this even if you do not agree to it. How do you amend your taxes Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. How do you amend your taxes If you want to learn more about this, contact any Social Security Office. How do you amend your taxes The Paperwork Reduction Act: This information collection meets the clearance requirements of 44 U. How do you amend your taxes S. How do you amend your taxes C. How do you amend your taxes §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. How do you amend your taxes You are not required to answer these questions unless we display a valid Office of Management and Budget control number. How do you amend your taxes We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. How do you amend your taxes Form SSA-131 (8-2001) EF (06-2002)   Submit Form SSA-131 to the SSA office nearest your place of business. How do you amend your taxes Or, the employee can submit it to the SSA office handling the claim. How do you amend your taxes You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. How do you amend your taxes 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. How do you amend your taxes Do not report payments from nonqualified deferred compensation or section 457 plans that were reported in box 11 of Form W-2. How do you amend your taxes Use Form SSA-131 if deferrals to and payments from nonqualified or section 457 plans occurred during the tax year. How do you amend your taxes 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. How do you amend your taxes It should not count for the social security earnings test. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Nonqualified and section 457 plans are reported differently than other special wage payments. How do you amend your taxes See Reporting Amounts Deferred to Nonqualified and Section 457 Plans below for specific instructions. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes The plans' deferrals, or contributions, are not subject to social security and Medicare taxes until the period of substantial risk of forfeiture ends. How do you amend your taxes No risk of forfeiture. How do you amend your taxes   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. How do you amend your taxes Example. How do you amend your taxes Company X's nonqualified deferred compensation plan allows the deferral of up to $20,000 of employee salaries each year. How do you amend your taxes The plan has no risk of forfeiture. How do you amend your taxes In 2012, Employee A defers $20,000 to the plan from a total salary of $200,000. How do you amend your taxes 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. How do you amend your taxes   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. How do you amend your taxes The accumulated deferrals are reported along with any other social security and Medicare wages earned during the year. How do you amend your taxes   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. How do you amend your taxes If the employee continues working, future deferrals are social security and Medicare wages when they are earned. How do you amend your taxes    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. How do you amend your taxes Risk of forfeiture lapses at retirement. How do you amend your taxes   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. How do you amend your taxes 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. How do you amend your taxes   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. How do you amend your taxes    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. How do you amend your taxes Example—risk of forfeiture. How do you amend your taxes 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. How do you amend your taxes B's wages, including this year's deferred amount, are $80,000. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Example. How do you amend your taxes Employee D retired from the XYZ company and began receiving social security benefits. How do you amend your taxes 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. How do you amend your taxes In addition, D agreed to continue performing services for XYZ, but on a part-time basis for wages of $15,000 per year. How do you amend your taxes D made no deferrals to the nonqualified plan this year. How do you amend your taxes 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. How do you amend your taxes For more information, see Reporting Special Wage Payments , earlier. How do you amend your taxes 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). How do you amend your taxes Report to the SSA on Form SSA-131 the total amount the employee earned during the tax year. How do you amend your taxes 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. How do you amend your taxes See Form SSA-131 and its instructions, earlier. How do you amend your taxes Example. How do you amend your taxes Employee K retired this year from Company XYZ and began receiving social security benefits. How do you amend your taxes During the year he earned wages of $50,000 and deferred $35,000 of the wages into the company's nonqualified deferred compensation plan. How do you amend your taxes K also received $75,000 in payments from the company's nonqualified plan. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes If you report section 409A deferrals, show the amount in box 12 of Form W-2 using code Y. How do you amend your taxes For more information, see Notice 2008-115, 2008-52 I. How do you amend your taxes R. How do you amend your taxes B. How do you amend your taxes 1367, available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2008-52_IRB/ar10. How do you amend your taxes html. How do you amend your taxes Special reporting rules apply when an NQDC plan is not compliant with section 409A (when there has been a “plan failure”). How do you amend your taxes Income included under section 409A from an NQDC plan is reported in box 1 and box 12 of Form W-2 using code Z. How do you amend your taxes See Notice 2008-115. How do you amend your taxes The following examples use small dollar amounts for illustrative purposes. How do you amend your taxes 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). How do you amend your taxes The term “vested” in the following examples means that the amount deferred is not subject to a substantial risk of forfeiture. How do you amend your taxes Conversely, the term “not vested” means that the amount deferred is subject to a substantial risk of forfeiture. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Example 1: Deferral that is immediately vested (no substantial risk of forfeiture) with no distributions and no vesting of prior-year deferrals. How do you amend your taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into her employer’s NQDC plan. How do you amend your taxes The deferral of $20 was vested upon deferral and there was an employer match of $10 under the plan, which was also vested. How do you amend your taxes Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10. How do you amend your taxes 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). How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes Regular pay = $200; Deferral, not vested = $20; Employer match, not vested = $10. How do you amend your taxes 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). How do you amend your taxes 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. How do you amend your taxes The deferral of $20 was vested upon deferral. How do you amend your taxes During the year, $100 of prior-year deferrals and $15 of investment earnings on the $100 of prior-year deferrals became vested. How do you amend your taxes Regular pay = $200; Deferral, vested = $20; Vesting of prior-year deferrals = $100; Vesting of investment earnings on $100 of prior-year deferral = $15. How do you amend your taxes 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). How do you amend your taxes For the year, the employee’s regular pay was $100, and the employee deferred no pay into the employer’s NQDC plan. How do you amend your taxes There was no vesting of prior-year deferrals under the plan. How do you amend your taxes During the year, there were total distributions of $50 from the plan to the employee. How do you amend your taxes Regular pay = $100; Distribution = $50. How do you amend your taxes 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). How do you amend your taxes   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. How do you amend your taxes Instead, report on Form SSA-131 the total amount the employee earned during the year. How do you amend your taxes * Submit the SSA-131 to the nearest SSA office or give it to the employee. How do you amend your taxes   *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. How do you amend your taxes Do not consider prior-year deferrals that are vesting in the current year. How do you amend your taxes If there was a plan failure, the box 1 amount in this calculation should be as if there were no plan failure. How do you amend your taxes Example 5: Deferral that is immediately vested and there are distributions (no vesting of prior-year deferrals). How do you amend your taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. How do you amend your taxes There was also an employer match of $10. How do you amend your taxes The deferral and employer match were vested upon deferral. How do you amend your taxes There was no vesting of prior-year deferrals under the plan. How do you amend your taxes During the year, there were total distributions of $50 from the plan to the employee. How do you amend your taxes Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10; Distribution = $50. How do you amend your taxes 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. How do you amend your taxes 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). How do you amend your taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. How do you amend your taxes The deferral was not vested upon deferral. How do you amend your taxes There was no vesting of prior-year deferrals under the plan. How do you amend your taxes During the year, there were total distributions of $50 from the plan to the employee. How do you amend your taxes Regular pay = $200; Deferral, not vested = $20; Distribution = $50. How do you amend your taxes 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). How do you amend your taxes 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). How do you amend your taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. How do you amend your taxes The deferral was vested upon deferral. How do you amend your taxes There was vesting of $100 of prior-year deferrals and $15 of earnings on the $100 prior-year deferral under the plan. How do you amend your taxes During the year, there were total distributions of $50 from the plan to the employee. How do you amend your taxes Regular pay = $200; Deferral, vested = $20; Distribution = $50; Vesting of prior-year deferrals ($100) and earnings on those prior-year deferrals ($15) = $115. How do you amend your taxes 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. How do you amend your taxes 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). How do you amend your taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. How do you amend your taxes The deferral was not vested upon deferral. How do you amend your taxes There was also vesting of prior-year deferrals and employer matches and earnings on these amounts under the plan ($115). How do you amend your taxes During the year, there were total distributions of $50 from the plan to the employee. How do you amend your taxes 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. How do you amend your taxes 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. How do you amend your taxes File Form SSA-131 -0-     Form SSA-131 Completion Item 6 ($230 Amount from Box 1 of Form W-2 minus $50 Distribution) $180 Table 2. How do you amend your taxes Specifications for Electronic Reporting of Special Wage Payments Record Position  Field Size   Description Start End 1 3 3 Record Type—must include only the capital letters “SWP” 4 12 9 SSN—must be numeric and may not be all zeros 13 27 15 Last Name—all capitals and no punctuation; may have blanks on right only 28 38 11 First Name—all capitals and no punctuation; may have blanks on right only 39 39 1 Middle Initial—must be either a capital letter or blank 40 48 9 EIN—must be numeric and may not be all zeros 49 59 11 Payment—must be numeric; may not be all zeros; last two digits on right are assumed to be cents; no period or dollar sign 60 63 4 Payment Year—must be only a four-digit year 64 66 3 SSA Office Code—must be numeric and may be all zeros 67 67 1 Payment Type Code—must be the capital letter “T” 68 117 50 Filler  The record format is a fixed length of 117. How do you amend your taxes  The file format is ASCII. How do you amend your taxes  Submit only one file at a time. How do you amend your taxes   Table 3. How do you amend your taxes Sample—Paper Listing for Reporting Special Wage Payments to Several Employees Report of Special Wage PaymentsTax Year: Page of A. How do you amend your taxes Employer Name: EIN:   Address: Contact Name:     Phone: ( )   . How do you amend your taxes 1) B. How do you amend your taxes Employee Name: (Last) (First) (MI)   C. How do you amend your taxes SSN: D. How do you amend your taxes SWP:$ E. How do you amend your taxes Type: Other: 2) B. How do you amend your taxes Employee Name: (Last) (First) (MI)   C. How do you amend your taxes SSN: D. How do you amend your taxes SWP:$ E. How do you amend your taxes Type: Other: 3) B. How do you amend your taxes Employee Name: (Last) (First) (MI)   C. How do you amend your taxes SSN: D. How do you amend your taxes SWP:$ E. How do you amend your taxes Type: Other: 4) B. How do you amend your taxes Employee Name: (Last) (First) (MI)   C. How do you amend your taxes SSN: D. How do you amend your taxes SWP:$ E. How do you amend your taxes Type: Other: 5) B. How do you amend your taxes Employee Name: (Last) (First) (MI)   C. How do you amend your taxes SSN: D. How do you amend your taxes SWP:$ E. How do you amend your taxes Type: Other:     INSTRUCTIONS:   Enter tax year and page number. How do you amend your taxes   A. How do you amend your taxes 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. How do you amend your taxes   B. How do you amend your taxes Employee's name. How do you amend your taxes   C. How do you amend your taxes Employee's social security number (SSN). How do you amend your taxes   D. How do you amend your taxes Total amount of special wage payments made to the employee. How do you amend your taxes   E. How do you amend your taxes 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. How do you amend your taxes   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. How do you amend your taxes (Get Form SSA-131. How do you amend your taxes )                 Prev  Up  Next   Home   More Online Publications
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How do you amend your taxes 6. How do you amend your taxes   Tip Income Table of Contents Introduction Useful Items - You may want to see: Keeping a Daily Tip RecordElectronic tip record. How do you amend your taxes Reporting Tips to Your EmployerElectronic tip statement. How do you amend your taxes Final report. How do you amend your taxes Reporting Tips on Your Tax Return Allocated Tips Introduction This chapter is for employees who receive tips. How do you amend your taxes All tips you receive are income and are subject to federal income tax. How do you amend your taxes You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. How do you amend your taxes The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to tax. How do you amend your taxes Reporting your tip income correctly is not difficult. How do you amend your taxes You must do three things. How do you amend your taxes Keep a daily tip record. How do you amend your taxes Report tips to your employer. How do you amend your taxes Report all your tips on your income tax return. How do you amend your taxes  This chapter will explain these three things and show you what to do on your tax return if you have not done the first two. How do you amend your taxes This chapter will also show you how to treat allocated tips. How do you amend your taxes For information on special tip programs and agreements, see Publication 531. How do you amend your taxes Useful Items - You may want to see: Publication 531 Reporting Tip Income 1244 Employee's Daily Record of Tips and Report to Employer Form (and Instructions) 4137 Social Security and Medicare Tax on Unreported Tip Income 4070 Employee's Report of Tips to Employer Keeping a Daily Tip Record Why keep a daily tip record. How do you amend your taxes   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. How do you amend your taxes How to keep a daily tip record. How do you amend your taxes   There are two ways to keep a daily tip record. How do you amend your taxes You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. How do you amend your taxes You should keep your daily tip record with your tax or other personal records. How do you amend your taxes You must keep your records for as long as they are important for administration of the federal tax law. How do you amend your taxes For information on how long to keep records, see How long to keep records in chapter 1. How do you amend your taxes    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. How do you amend your taxes To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244. How do you amend your taxes Also, Publication 1244 is available online at www. How do you amend your taxes irs. How do you amend your taxes gov/pub/irs-pdf/p1244. How do you amend your taxes pdf. How do you amend your taxes Publication 1244 includes a 1-year supply of Form 4070A. How do you amend your taxes Each day, write in the information asked for on the form. How do you amend your taxes   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. How do you amend your taxes Although you do not report these tips to your employer, you must report them on your tax return. How do you amend your taxes   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). How do you amend your taxes Then, each workday, write the date and the following information. How do you amend your taxes Cash tips you get directly from customers or from other employees. How do you amend your taxes Tips from credit and debit card charge customers that your employer pays you. How do you amend your taxes The value of any noncash tips you get, such as tickets, passes, or other items of value. How do you amend your taxes The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. How do you amend your taxes Electronic tip record. How do you amend your taxes   You can use an electronic system provided by your employer to record your daily tips. How do you amend your taxes If you do, you must receive and keep a paper copy of this record. How do you amend your taxes Service charges. How do you amend your taxes    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. How do you amend your taxes This is part of your wages, not a tip. How do you amend your taxes See examples below. How do you amend your taxes Example 1. How do you amend your taxes Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. How do you amend your taxes Jane’s bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. How do you amend your taxes Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. How do you amend your taxes Do not include the 18% charge in your tip diary. How do you amend your taxes Service charges that are paid to you are considered wages, not tips. How do you amend your taxes Example 2. How do you amend your taxes Good Food Restaurant also includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. How do you amend your taxes David’s bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of his charges for food and beverages at the bottom of the bill beneath the signature line. How do you amend your taxes Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. How do you amend your taxes Be sure to include this amount in your tip diary. How do you amend your taxes Reporting Tips to Your Employer Why report tips to your employer. How do you amend your taxes   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). How do you amend your taxes What tips to report. How do you amend your taxes   Report to your employer only cash, check, and debit and credit card tips you receive. How do you amend your taxes   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. How do you amend your taxes   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. How do you amend your taxes Do not report to your employer any portion of the tips you receive that you pass on to other employees. How do you amend your taxes However, you must report tips you receive from other employees. How do you amend your taxes    Do not report the value of any noncash tips, such as tickets or passes, to your employer. How do you amend your taxes You do not pay social security, Medicare, Additional Medicare or railroad retirement taxes on these tips. How do you amend your taxes How to report. How do you amend your taxes    If your employer does not give you any other way to report tips, you can use Form 4070. How do you amend your taxes Fill in the information asked for on the form, sign and date the form, and give it to your employer. How do you amend your taxes To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. How do you amend your taxes   If you do not use Form 4070, give your employer a statement with the following information. How do you amend your taxes Your name, address, and social security number. How do you amend your taxes Your employer's name, address, and business name (if it is different from your employer's name). How do you amend your taxes The month (or the dates of any shorter period) in which you received tips. How do you amend your taxes The total tips required to be reported for that period. How do you amend your taxes You must sign and date the statement. How do you amend your taxes Be sure to keep a copy with your tax or other personal records. How do you amend your taxes   Your employer may require you to report your tips more than once a month. How do you amend your taxes However, the statement cannot cover a period of more than 1 calendar month. How do you amend your taxes Electronic tip statement. How do you amend your taxes   Your employer can have you furnish your tip statements electronically. How do you amend your taxes When to report. How do you amend your taxes   Give your report for each month to your employer by the 10th of the next month. How do you amend your taxes If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. How do you amend your taxes Example. How do you amend your taxes You must report your tips received in September 2014 by October 10, 2014. How do you amend your taxes Final report. How do you amend your taxes   If your employment ends during the month, you can report your tips when your employment ends. How do you amend your taxes Penalty for not reporting tips. How do you amend your taxes   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, and Additional Medicare taxes or railroad retirement tax you owe on the unreported tips. How do you amend your taxes (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. How do you amend your taxes ) The penalty amount is in addition to the taxes you owe. How do you amend your taxes   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. How do you amend your taxes To do so, attach a statement to your return explaining why you did not report them. How do you amend your taxes Giving your employer money for taxes. How do you amend your taxes   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. How do you amend your taxes If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. How do you amend your taxes   If you do not give your employer enough money, your employer will apply your regular pay and any money you give in the following order. How do you amend your taxes All taxes on your regular pay. How do you amend your taxes Social security, Medicare, and Additional Medicare taxes or railroad retirement taxes on your reported tips. How do you amend your taxes Federal, state, and local income taxes on your reported tips. How do you amend your taxes    Any taxes that remain unpaid can be collected by your employer from your next paycheck. How do you amend your taxes If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. How do you amend your taxes See Publication 505, Tax Withholding and Estimated Tax, for more information. How do you amend your taxes    Uncollected taxes. How do you amend your taxes You must report on your tax return any social security and Medicare taxes or railroad retirement tax that remained uncollected at the end of 2013. How do you amend your taxes These uncollected taxes will be shown on your 2013 Form W-2. How do you amend your taxes See Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. How do you amend your taxes Reporting Tips on Your Tax Return How to report tips. How do you amend your taxes    Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; or Form 1040EZ, line 1. How do you amend your taxes What tips to report. How do you amend your taxes   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. How do you amend your taxes Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. How do you amend your taxes Add to the amount in box 1 only the tips you did not report to your employer. How do you amend your taxes    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. How do you amend your taxes    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. How do you amend your taxes   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. How do you amend your taxes Cash and charge tips you received that totaled less than $20 for any month. How do you amend your taxes The value of noncash tips, such as tickets, passes, or other items of value. How do you amend your taxes Example. How do you amend your taxes Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. How do you amend your taxes Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. How do you amend your taxes He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. How do you amend your taxes Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages plus $7,000 reported tips) in box 1. How do you amend your taxes He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. How do you amend your taxes Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. How do you amend your taxes    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. How do you amend your taxes To report these taxes, you must file a return even if you would not otherwise have to file. How do you amend your taxes You must use Form 1040. How do you amend your taxes (You cannot file Form 1040EZ or Form 1040A. How do you amend your taxes )    Use Form 4137 to figure social security and Medicare taxes. How do you amend your taxes Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. How do you amend your taxes Use Form 8959 to figure Additional Medicare Tax. How do you amend your taxes    If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. How do you amend your taxes To get railroad retirement credit, you must report tips to your employer. How do you amend your taxes Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer. How do you amend your taxes   You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. How do you amend your taxes For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. How do you amend your taxes   If your employer could not collect all the social security and Medicare taxes or railroad retirement tax you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). How do you amend your taxes You must report these amounts as additional tax on your return. How do you amend your taxes Unlike the uncollected portion of the regular (1. How do you amend your taxes 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported in box 12 of Form W-2 with code B. How do you amend your taxes    To report these uncollected taxes, you must file a return even if you would not otherwise have to file. How do you amend your taxes You must report these taxes on Form 1040, line 60. How do you amend your taxes See the instructions for Form 1040, line 60. How do you amend your taxes (You cannot file Form 1040EZ or Form 1040A. How do you amend your taxes ) Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. How do you amend your taxes They are not included in box 1 with your wages and reported tips. How do you amend your taxes If box 8 is blank, this discussion does not apply to you. How do you amend your taxes What are allocated tips. How do you amend your taxes   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. How do you amend your taxes Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. How do you amend your taxes No income, social security, Medicare, Additional Medicare or railroad retirement taxes are withheld on allocated tips. How do you amend your taxes How were your allocated tips figured. How do you amend your taxes   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). How do you amend your taxes Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. How do you amend your taxes For information about the exact allocation method used, ask your employer. How do you amend your taxes Must you report your allocated tips on your tax return. How do you amend your taxes   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. How do you amend your taxes Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. How do you amend your taxes Add to the amount in box 1 only the tips you did not report to your employer. How do you amend your taxes This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated figures. How do you amend your taxes   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. How do you amend your taxes How to report allocated tips. How do you amend your taxes   Report the amount in box 1 and the allocated tips in box 8 of your Form(s) W-2 as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. How do you amend your taxes (You cannot file Form 1040A or Form 1040EZ when you have allocated tips. How do you amend your taxes )    Because social security, Medicare, and Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. How do you amend your taxes Complete Form 4137, and include the allocated tips on line 1 of the form. How do you amend your taxes See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. How do you amend your taxes Prev  Up  Next   Home   More Online Publications