Instructions For Forms W-2 And W-3 - Wage And Tax Statement And Transmittal Of Wage And Tax Statements - 2006 Page 10

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For more information on accountable plans,
Option two is to file two Forms W-2 and two Forms W-3.
nonaccountable plans, amounts treated as substantiated
File one Form W-2 for wages subject to Medicare tax only.
under a per diem or mileage allowance, the standard
Be sure to check the “Medicare govt. emp.” box in box b of
mileage rate, the per diem substantiation method, and the
Form W-3. File the second Form W-2 for wages subject to
high-low substantiation method, see Pub. 463, Travel,
both social security and Medicare taxes with the “941” box
Entertainment, Gift, and Car Expenses; Pub. 1542, Per
checked in box b of Form W-3. The wages in box 5 on each
Diem Rates; and section 5 of Pub. 15 (Circular E).
Form W-2 must be equal to or greater than the wages in
box 3 on that same Form W-2.
Employee’s taxes paid by employer. If you paid your
Group-term life insurance. If you paid for group-term life
employee’s share of social security and Medicare taxes
rather than deducting them from the employee’s wages, you
insurance over $50,000 for an employee or a former
must include these payments as wages subject to income
employee, you must report the taxable cost of excess
tax withholding and social security, Medicare, and federal
coverage, determined by using the table in section 2 of Pub.
unemployment (FUTA) taxes. Generally, this increase in
15-B, in boxes 1, 3, and 5 of Form W-2. Also, show the
amount in box 12 with code C. For employees, you must
your employee’s wages for your payment of the employee’s
withhold social security and Medicare taxes, but not income
social security and Medicare taxes is also subject to
tax. Former employees must pay the employee part of social
employee social security and Medicare taxes. The amount
security and Medicare taxes on the taxable cost of
to include as wages is determined by using the formula
contained in the discussion of Employee’s Portion of Taxes
group-term life insurance over $50,000 on Form 1040. You
Paid by Employer in section 7 of Pub. 15 (Circular E).
are not required to collect those taxes. However, you must
report the uncollected social security tax with code M and
This does not apply to household and agricultural
the uncollected Medicare tax with code N in box 12 of
!
employers. If you pay a household or agricultural
Form W-2.
employee’s social security and Medicare taxes, you
CAUTION
Health Savings Account (HSA). An employer’s
must include these payments in the employee’s wages.
contribution to an employee’s Health Savings Account
However, the wage increase due to the tax payments is not
(HSA) is not subject to income tax withholding, or social
subject to social security, Medicare, or FUTA taxes. For
security, Medicare, or railroad retirement taxes (or FUTA
information on completing Forms W-2 and W-3 in this
tax) if it is reasonable to believe at the time of the payment
situation, see the Instructions for Schedule H (Form 1040),
that the contribution will be excludable from the employee’s
Household Employers and section 4 of Pub. 51 (Circular A).
income. However, if it is not reasonable to believe at the
Fringe benefits. Include all taxable fringe benefits in box 1
time of payment that the contribution will be excludable from
of Form W-2 as wages, tips, and other compensation and, if
the employee’s income, employer contributions are subject
applicable, in boxes 3 and 5 as social security and Medicare
to income tax withholding and social security and Medicare
wages. Although not required, you may include the total
taxes (or railroad retirement taxes, if applicable) and must
value of fringe benefits in box 14 (or on a separate
be reported in boxes 1, 3, and 5 (and on Form 940,
statement). However, if you provided your employee a
Employer’s Annual Federal Unemployment (FUTA) Tax
vehicle and included 100% of its annual lease value in the
Return).
employee’s income, you must separately report this value to
You must report all employer contributions to an HSA in
the employee in box 14 (or on a separate statement). The
box 12 of Form W-2 with code W. Employer contributions to
employee can then figure the value of any business use of
an HSA that are not excludable from the income of the
the vehicle and report it on Form 2106, Employee Business
employee also must be reported in box 1.
Expenses. Also see Pub. 15-B for more information.
An employee’s contributions to an HSA are includible in
If you used the commuting rule or the vehicle
income as wages and are subject to income tax withholding
!
cents-per-mile rule to value the personal use of the
and social security and Medicare taxes (or railroad
vehicle, you cannot include 100% of the value of the
CAUTION
retirement taxes, if applicable). Employee contributions are
use of the vehicle in the employee’s income. See Pub. 15-B.
deductible, within limits, on the employee’s Form 1040. For
Golden parachute payments. Include any golden
more information about HSAs, see Notice 2004-2 and
parachute payments in boxes 1, 3, and 5 of Form W-2.
Notice 2004-50. You can find Notice 2004-2 on page 269 of
Withhold income, social security, and Medicare taxes as
Internal Revenue Bulletin 2004-2 at
usual and report them in boxes 2, 4, and 6, respectively.
irs-irbs/irb04-02.pdf. You can find Notice 2004-50 on page
Excess parachute payments are also subject to a 20%
196 of Internal Revenue Bulletin 2004-33 at
excise tax. If the excess payments are considered wages,
pub/irs-irbs/irb04-33.pdf. Also see Form 8889, Health
withhold the 20% excise tax and include it in box 2 as
Savings Accounts (HSAs), and Pub. 969.
income tax withheld. Also report the excise tax in box 12
Lost Form W-2 — reissued statement. If an employee
with code K. For definitions and additional information, see
loses a Form W-2, write “REISSUED STATEMENT” on the
Regulations section 1.280G-1 and Rev. Proc. 2003-68. You
new copy and furnish it to the employee. You do not have to
can find Rev. Proc. 2003-68 on page 398 of Internal
add “Reissued Statement” on Forms W-2 provided to
Revenue Bulletin 2003-34 at irs-irbs/
employees electronically. Do not send Copy A of the
irb03-34.pdf.
reissued Form W-2 to the SSA. Employers are not
Government employers. Federal, state, and local
prohibited (by the Internal Revenue Code) from charging a
agencies have two options for reporting their employees’
fee for the issuance of a duplicate Form W-2.
wages that are subject only to Medicare tax for part of the
Moving expenses. Report moving expenses as follows:
year and full social security and Medicare taxes for part of
Qualified moving expenses that an employer paid to a
the year.
third party on behalf of the employee (for example, to a
Option one (which the SSA prefers) is to file a single
moving company) and services that an employer furnished
Form W-2 reflecting the employees’ wages for the entire
in kind to an employee are not reported on Form W-2.
year, even if only part of the year’s wages were subject to
Qualified moving expense reimbursements paid directly to
both social security and Medicare taxes. The Form W-3
an employee by an employer are reported only in box 12 of
must have the “941” box checked in box b. The wages in
Form W-2 with code P.
box 5 must be equal to or greater than the wages in box 3
Nonqualified moving expense reimbursements are
on Form W-2.
reported in boxes 1, 3, and 5 of Form W-2. These amounts
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