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tax year(s) for which back pay is credited as wages for so-

If employers do notify the SSA of this payment,

cial security purposes is different if it is awarded under a

they should prepare a special report (with the in-

statute. See

Back Pay Under a

Statute, later, for more in-

formation noted below) and send it to:

formation.

Social Security Administration

Attn: CPS Back Pay Staff

Reporting Back Pay

7-B-15 SWT

1500 Woodlawn Drive

The Internal Revenue Service (IRS) and the SSA consider

Baltimore, MD 21241-0001

back pay awards to be wages. However, for income tax

purposes, the IRS treats all back pay as wages in the year

Be sure to send this special report to the above address

paid.

because the SSA handles it separately from other reports.

Employers should use Form W-2, Wage and Tax State-

ment, or electronic wage reports to report back pay as wa-

If you paid the back pay award in the same tax

ges in the year they actually pay the employee. The SSA

year to which it applies, report the wages on that

TIP

no longer accepts reports on tapes, cartridges, and disk-

year's Form W-2. No further action is necessary.

ettes.

Example. In 2012, Judy Wilson received a salary of

Example. In 2012, Terry Morris earned wages of

$30,000 and a back pay under statute award of $2,000 for

$50,000. In the same year, she received $100,000 in set-

the period January through June 2012. Her employer

tlement of a back pay case against her employer that cov-

properly reported wages of $32,000 for social security and

ered the periods January 2007 through December 2011.

Medicare on her 2012 Form W-2. No further action is nec-

Her employer properly reflected social security wages of

essary.

$110,100 and Medicare wages of $150,000 on her 2012

Form W-2.

Information the SSA needs to properly credit back

pay under a statute (special report). After you com-

However, if an employer did not include back pay wa-

plete the special report, you or the employee should send

ges on a previously filed Form W-2, magnetic media, or

it to the SSA when or after you submit the Form W-2 (on

electronically filed wage report, the employer should pre-

paper or electronically) to the SSA for the year you pay

pare a wage correction report, Form W-2c, Corrected

the statutory back pay to the employee. There is no stat-

Wage and Tax Statement, or electronically filed report, to

ute of limitations on the filing of the special report to ena-

add the back pay award to the wages previously reported.

ble the SSA to allocate the wages. The special report

must include the following information.

Example. If, in the above example, Terry Morris' em-

ployer had prepared her 2012 Form W-2 reporting social

1. The employer's name, address, and employer identifi-

security and Medicare wages of only $50,000 each, the

cation number (EIN).

employer would have to correct that report. A Form W-2c

2. A signed statement citing the federal or state statute

correcting the 2012 Form W-2 would show previously re-

under which the payment was made. If the statute is

ported social security and Medicare wages of $50,000

not identified, the SSA will assume the payment was

and the correct amount of $110,100 for social security wa-

not under a statute and will not allocate to earlier pe-

ges and $150,000 for Medicare wages.

riod(s).

SSA treatment of back pay under a statute. Under the

3. The name and telephone number of a person to con-

law, the SSA credits back pay awarded under a statute to

tact. The SSA may have additional questions con-

an individual's earnings record in the period(s) the wages

cerning the back pay case or the individual employ-

should have been paid. This is important because wages

ee's information.

not credited to the proper year may result in lower social

security benefits or failure to meet the requirements for

4. A list of employees receiving the payment and the fol-

benefits.

lowing information for each employee:

However, back pay under statute payments will remain

a. The tax year you paid and reported the back pay.

posted to the employee's social security earnings record

in the year reported on Form W-2 (or Form W-2c) unless

b. The employee's social security number (SSN).

the employer or employee notifies the SSA (in a separate,

c. The employee's name (as shown on his or her so-

special report) of the back pay under a statute payment.

cial security card).

Then, the SSA can allocate the statutory back pay to the

appropriate periods.

d. The amount of the back pay award excluding any

If a back pay award is not made under a statute, the

amounts specifically designated otherwise, for ex-

SSA credits back pay as wages in the year paid.

ample, damages for personal injury, interest, pen-

alties, and legal fees.

e. The period(s) the back pay award covers (begin-

ning and ending dates—month and year).

Page 2

Publication 957 (January 2013)

Publication 957 - Reporting Back Pay And Special Wage Payments To The Social Security Administration - Internal Revenue Service Page 3

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