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If you are making an adjustment in 2006 to correct social

Box 4 – 806.00 (6.2% of the amount in box 3)

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security and Medicare taxes for a prior year, you must file

Box 5 – 13000.00 (includes the $3,000 accrued wages

Form 941c, Supporting Statement To Correct Information,

and vacation pay)

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with your Form 941, Form 943, or Form 944 in the return

Box 6 – 188.50 (1.45% of the amount in box 5)

period that you find the error, and issue the employee a

Employer X also must complete Form 1099-MISC as

Form W-2c for the prior year. If you are correcting social

follows:

security or Medicare wages or tips, also file the entire

CAUTION

Copy A page of Form W-2c and Form W-3c with the SSA to

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Boxes for: Recipient’s name, address, and TIN — The

correct the social security records and any other items on

estate’s name, address, and TIN

the original Form W-2 (or previously filed Form W-2c) that

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Box 3: 3000.00 (Even though amounts were withheld for

were in error.

social security and Medicare taxes, the gross amount is

Incorrect address on employee’s Form W-2. If you

reported here.)

filed a Form W-2 with the SSA showing an incorrect address

If Employer X made the payment after the year of

for the employee but all other information on Form W-2 is

death, the $3,000 would not be subject to social security

correct, do not file Form W-2c with the SSA merely to

and Medicare taxes and would not be shown on Form W-2.

correct the address.

However, the employer would still file Form 1099-MISC.

However, if the address was incorrect on the Form W-2

Designated Roth contributions. New section 402A, added

furnished to the employee, you must do one of the

by the Economic Growth and Tax Reconciliation Act of

following:

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2001, provides that a participant in a section 401(k) plan or

Issue a new, corrected Form W-2 to the employee,

under a 403(b) salary reduction agreement that includes a

including the new address. Indicate “REISSUED

qualified Roth contribution program may elect to make

STATEMENT” on the new copies. Do not send Copy A to

designated Roth contributions to the plan or program in lieu

the SSA.

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of elective deferrals. Designated Roth contributions are

Issue a Form W-2c to the employee showing the correct

subject to income tax withholding and social security and

address in box f and all other correct information. Do not

Medicare taxes (and railroad retirement taxes, if applicable)

send Copy A to the SSA.

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and must be reported in boxes 1, 3, and 5.

Mail the Form W-2 with the incorrect address to the

The Act requires separate reporting of the yearly

employee in an envelope showing the correct address or

designated Roth contributions. Designated Roth

otherwise deliver it to the employee.

contributions to 401(k) plans will be reported using code AA

Deceased employee’s wages. If an employee dies during

in box 12; designated Roth contributions under 403(b) salary

the year, you must report the accrued wages, vacation pay,

reduction agreements will be reported using code BB in

and other compensation paid after the date of death.

box 12. For reporting instructions, see Code AA and Code

If you made the payment in the same year that the

BB on page 13.

employee died, you must withhold social security and

Educational assistance programs. A $5,250 exclusion for

Medicare taxes on the payment and report the payment on

employer-provided educational assistance applies to

the employee’s Form W-2 only as social security and

benefits provided to your employees under an educational

Medicare wages to ensure proper social security and

assistance program. See Pub. 970, Tax Benefits for

Medicare credit is received.

Education, and section 2 of Pub. 15-B for more information.

On the employee’s Form W-2, show the payment as

Also see Box 1 – Wages, tips, other compensation on

social security wages (box 3) and Medicare wages and tips

page 9.

(box 5) and the social security and Medicare taxes withheld

Election workers. Report on Form W-2 payments of $600

in boxes 4 and 6. Do not show the payment in box 1.

or more to election workers for services performed in state,

If you made the payment after the year of death, do

county, and municipal elections. File Form W-2 for

not report it on Form W-2, and do not withhold social

payments of less than $600 paid to election workers if social

security and Medicare taxes.

security and Medicare taxes were withheld under a section

218 (Social Security Act) agreement. Do not report election

Whether the payment is made in the year of death or

worker payments on Form 1099-MISC.

after the year of death, you also must report it in box 3

of Form 1099-MISC, Miscellaneous Income, for the

If the election worker is employed in another capacity

payment to the estate or beneficiary. Use the name and

with the same government entity, see Rev. Rul. 2000-06 on

taxpayer identification number (TIN) of the payment

page 512 of Internal Revenue Bulletin 2000-06 at

recipient on Form 1099-MISC.

Example. Before Employee A’s death on June 15, 2006,

Employee business expense reimbursements.

A was employed by Employer X and received $10,000 in

Reimbursements to employees for business expenses must

wages on which federal income tax of $1,500 was withheld.

be reported as follows:

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When A died, X owed A $2,000 in wages and $1,000 in

Generally, payments made under an accountable plan

accrued vacation pay. The total of $3,000 (less the social

are excluded from the employee’s gross income and are not

security and Medicare taxes withheld) was paid to A’s estate

reported on Form W-2. However, if you pay a per diem or

on July 20, 2006. Because X made the payment during the

mileage allowance and the amount paid exceeds the

year of death, X must withhold social security and Medicare

amount treated as substantiated under IRS rules, you must

taxes on the $3,000 payment and must complete Form W-2

report as wages on Form W-2 the amount in excess of the

as follows:

amount treated as substantiated. The excess amount is

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Box d – Employee A’s SSN

subject to income tax withholding and social security and

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Box e – Employee A’s name

Medicare taxes. Report the amount treated as substantiated

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Box f – Employee A’s address

(that is, the nontaxable portion) in box 12 using code L. See

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Box 1 – 10000.00 (does not include the $3,000 accrued

Code L – Substantiated employee business expense

wages and vacation pay)

reimbursements on page 12.

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Box 2 – 1500.00

Payments made under a nonaccountable plan are

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Box 3 – 13000.00 (includes the $3,000 accrued wages

reported as wages on Form W-2 and are subject to income

and vacation pay)

tax withholding and social security and Medicare taxes.

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Instructions For Forms W-2 And W-3 - Wage And Tax Statement And Transmittal Of Wage And Tax Statements - 2006 Page 9

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