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Military Tax Filing

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