Instructions For Forms W-2 And W-3 - 2010 (Page 5 of 15) in pdf

were constructively received by the employee while he or she

provided to your employees under an educational assistance

was alive are reported on Form W-2 as any other regular wage

program. However, educational assistance that exceeds $5,250

payment, even if you may have to reissue the payment in the

may be excludable from an employee’s wages if it qualifies as a

name of the estate or beneficiary.

working condition benefit. See Pub. 970, Tax Benefits for

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

If you made the payment after the employee’s death but in

Also see Box 1 — Wages, tips, other compensation on page 9.

the same year the employee died, you must withhold social

security and Medicare taxes on the payment and report the

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

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

more to election workers for services performed in state,

and Medicare wages to ensure proper social security and

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

Medicare credit is received.

less than $600 paid to election workers if social security and

Medicare taxes were withheld under a section 218 (Social

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

Security Act) agreement. Do not report election worker

security wages (box 3) and Medicare wages and tips (box 5)

payments on Form 1099-MISC.

and the social security and Medicare taxes withheld in boxes 4

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

If the election worker is employed in another capacity with

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

If you made the payment after the year of death, do not

512 of Internal Revenue Bulletin 2000-06 at

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

Medicare taxes.

Employee business expense reimbursements.

Whether the payment is made in the year of death or after

Reimbursements to employees for business expenses must be

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

reported as follows:

1099-MISC, Miscellaneous Income, for the payment to the

•

Generally, payments made under an accountable plan are

estate or beneficiary. Use the name and taxpayer identification

excluded from the employee’s gross income and are not

number (TIN) of the payment recipient on Form 1099-MISC.

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

Example. Before Employee A’s death on June 15, 2010, A

mileage allowance and the amount paid for substantiated miles

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

or days traveled exceeds the amount treated as substantiated

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

under IRS rules, you must report as wages on Form W-2 the

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

amount in excess of the amount treated as substantiated. The

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

excess amount is subject to income tax withholding and social

Medicare taxes withheld) was paid to A’s estate on July 20,

security and Medicare taxes. Report the amount treated as

2010. Because X made the payment during the year of death, X

substantiated (that is, the nontaxable portion) in box 12 using

must withhold social security and Medicare taxes on the $3,000

code L. See Code L — Substantiated employee business

payment and must complete Form W-2 as follows:

expense reimbursements on page 12.

•

Box a – Employee A’s SSN

Payments made under a nonaccountable plan are reported

•

Box e – Employee A’s name

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

•

Box f – Employee A’s address

withholding and social security and Medicare taxes.

•

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

For more information on accountable plans, nonaccountable

wages and vacation pay)

•

plans, amounts treated as substantiated under a per diem or

Box 2 – 1500.00

•

mileage allowance, the standard mileage rate, the per diem

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

substantiation method, and the high-low substantiation method,

vacation pay)

•

see Pub. 463, Travel, Entertainment, Gift, and Car Expenses;

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

•

Pub. 1542, Per Diem Rates; and section 5 of Pub. 15 (Circular

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

E).

vacation pay)

•

Employee’s social security and Medicare taxes paid by

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

employer. If you paid your employee’s share of social security

Employer X also must complete Form 1099-MISC as

and Medicare taxes rather than deducting them from the

follows:

employee’s wages, you must include these payments as wages

CAUTION

subject to federal income tax withholding and social security,

•

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

Medicare, and federal unemployment (FUTA) taxes. The

estate’s name, address, and TIN

amount to include as wages is determined by using the formula

•

Box 3: 3000.00 (Even though amounts were withheld for

contained in the discussion of Employee’s Portion of Taxes

social security and Medicare taxes, the gross amount is

Paid by Employer in section 7 of Pub. 15-A.

reported here.)

This does not apply to household and agricultural

If Employer X made the payment after the year of death, the

employers. If you pay a household or agricultural

$3,000 would not be subject to social security and Medicare

employee’s social security and Medicare taxes, you

CAUTION

taxes and would not be shown on Form W-2. However, the

must include these payments in the employee’s wages for

employer would still file Form 1099-MISC.

income tax withholding purposes. However, the wage increase

Designated Roth contributions. Under section 402A, a

due to the tax payments is not subject to social security,

participant in a section 401(k) plan or under a 403(b) salary

Medicare, or FUTA taxes. For information on completing Forms

reduction agreement that includes a qualified Roth contribution

W-2 and W-3 in this situation, see the Instructions for Schedule

program may elect to make designated Roth contributions to

H (Form 1040), Household Employers, and section 3 of Pub. 51

the plan or program in lieu of elective deferrals. Designated

(Circular A).

Roth contributions are subject to federal income tax withholding

Fringe benefits. Include all taxable fringe benefits in box 1 of

and social security and Medicare taxes (and railroad retirement

Form W-2 as wages, tips, and other compensation and, if

taxes, if applicable) and must be reported in boxes 1, 3, and 5.

applicable, in boxes 3 and 5 as social security and Medicare

Section 402A requires separate reporting of the yearly

wages. Although not required, you may include the total value

designated Roth contributions. Designated Roth contributions to

of fringe benefits in box 14 (or on a separate statement).

401(k) plans will be reported using code AA in box 12;

However, if you provided your employee a vehicle and included

designated Roth contributions under 403(b) salary reduction

100% of its annual lease value in the employee’s income, you

agreements will be reported using code BB in

must separately report this value to the employee in box 14 (or

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

on a separate statement). The employee can then figure the

on page 12.

value of any business use of the vehicle and report it on Form

Educational assistance programs. A $5,250 exclusion for

2106, Employee Business Expenses. Also see Pub. 15-B for

employer-provided educational assistance applies to benefits

more information.

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Instructions for Forms W-2 and W-3 (2010)

Instructions For Forms W-2 And W-3 - 2010 Page 5

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