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Vita Tax

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Vita Tax

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

Vita tax Publication 559 - Introductory Material Table of Contents Future Developments Reminders Introduction Useful Items - You may want to see: Future Developments For the latest information about developments affecting Publication 559, such as legislation enacted after we release it, go to www. Vita tax irs. Vita tax gov/pub559. Vita tax Reminders Throughout this publication, section references are to the Internal Revenue Code unless otherwise noted. Vita tax Consistent treatment of estate and trust items. Vita tax  Beneficiaries must generally treat estate items the same way on their individual returns as they are treated on the estate's return. Vita tax Photographs of missing children. Vita tax  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Vita tax Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Vita tax You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Vita tax Introduction This publication is designed to help those in charge (personal representatives) of the property (estate) of an individual who has died (decedent). Vita tax It shows them how to complete and file federal income tax returns and explains their responsibility to pay any taxes due on behalf of the decedent. Vita tax A comprehensive example of the decedent's final tax return, Form 1040, and estate's income tax return, Form 1041, are included in this publication. Vita tax The publication also explains how much money or property a taxpayer can give away during their lifetime or leave to their heirs at their death before any tax will be owed. Vita tax A discussion of Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, and Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is included. Vita tax Also included in this publication are the following items: A checklist of the forms you may need and their due dates. Vita tax A worksheet to reconcile amounts reported in the decedent's name on information returns including Forms W-2, 1099-INT, 1099-DIV, etc. Vita tax The worksheet will help you correctly determine the income to report on the decedent's final return and on the return for either the estate or a beneficiary. Vita tax Comments and suggestions. Vita tax   We welcome your comments about this publication and your suggestions for future editions. Vita tax   You can send us comments from http://www. Vita tax irs. Vita tax gov/formspubs. Vita tax Click on “More Information” and then on “Give us Feedback. Vita tax ” Or you can also send your comments to the Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. Vita tax NW, IR-6526, Washington, DC 20224. Vita tax Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide Form (and Instructions) SS-4 Application for Employer Identification Number 56 Notice Concerning Fiduciary Relationship 1040 U. Vita tax S. Vita tax Individual Income Tax Return 1041 U. Vita tax S. Vita tax Income Tax Return for Estates and Trusts 706 United States Estate (and Generation-Skipping Transfer) Tax Return 709 United States Gift (and Generation-Skipping Transfer) Tax Return 1310 Statement of Person Claiming Refund Due a Deceased Taxpayer  See How To Get Tax Help near the end of this publication for information about getting publications and forms. Vita tax Also near the end of this publication is Table A, a checklist of forms and their due dates for the executor, administrator, or personal representative. Vita tax Prev  Up  Next   Home   More Online Publications