Instructions For Forms W-2 And W-3 - 2010 (Page 6 of 15) in pdf

If you used the commuting rule or the vehicle

page 196 of Internal Revenue Bulletin 2004-33 at

cents-per-mile rule to value the personal use of the

pub/irs-irbs/irb04-33.pdf. Also see Form 8889, Health Savings

vehicle, you cannot include 100% of the value of the use

Accounts (HSAs), and Pub. 969.

CAUTION

of the vehicle in the employee’s income. See Pub. 15-B.

Lost Form W-2 — reissued statement. If an employee loses

Golden parachute payments. Include any golden parachute

a Form W-2, write “REISSUED STATEMENT” on the new copy

payments in boxes 1, 3, and 5 of Form W-2. Withhold federal

and furnish it to the employee. You do not have to add

income, social security, and Medicare taxes as usual and report

“REISSUED STATEMENT” on Forms W-2 provided to

them in boxes 2, 4, and 6, respectively. Excess parachute

employees electronically. Do not send Copy A of the reissued

payments are also subject to a 20% excise tax. If the excess

Form W-2 to the SSA. Employers are not prohibited (by the

Internal Revenue Code) from charging a fee for the issuance of

payments are considered wages, withhold the 20% excise tax

a duplicate Form W-2.

and include it in box 2 as income tax withheld. Also report the

excise tax in box 12 with code K. For definitions and additional

Moving expenses. Report moving expenses as follows:

•

information, see Regulations section 1.280G-1 and Rev. Proc.

Qualified moving expenses that an employer paid to a third

2003-68, which is on page 398 of Internal Revenue Bulletin

party on behalf of the employee (for example, to a moving

2003-34 at pub/irs-irbs/irb03-34.pdf.

company) and services that an employer furnished in kind to an

employee are not reported on Form W-2.

Government employers. Federal, state, and local agencies

•

Qualified moving expense reimbursements paid directly to an

have two options for reporting their employees’ wages that are

employee by an employer are reported only in box 12 of Form

subject only to Medicare tax for part of the year and full social

W-2 with code P.

security and Medicare taxes for part of the year.

•

Nonqualified moving expense reimbursements are reported

Option one (which the SSA prefers) is to file a single Form

in boxes 1, 3, and 5 of Form W-2. These amounts are subject to

W-2 reflecting the employees’ wages for the entire year, even if

federal income tax withholding and social security and Medicare

only part of the year’s wages was subject to both social security

taxes (or railroad retirement taxes, if applicable).

and Medicare taxes. The Form W-3 must have the “941” box

Nonqualified deferred compensation plans. Section 409A

checked in box b. The wages in box 5 must be equal to or

provides that all amounts deferred under a nonqualified

greater than the wages in box 3 on Form W-2.

deferred compensation (NQDC) plan for all tax years are

Option two is to file two Forms W-2 and two Forms W-3. File

currently includible in gross income unless certain requirements

one Form W-2 for wages subject to Medicare tax only. Be sure

are met. If section 409A requires an amount to be included in

to check the “Medicare govt. emp.” box in box b of Form W-3.

gross income, the section imposes a 20 percent additional tax.

File the second Form W-2 for wages subject to both social

Section 409A, generally, is effective with respect to amounts

security and Medicare taxes with the “941” box checked in box

deferred in tax years beginning after December 31, 2004, but

b of Form W-3. The wages in box 5 on each Form W-2 must be

deferrals made prior to that year may be subject to section

equal to or greater than the wages in box 3 on that same Form

409A under some circumstances.

W-2.

It is not necessary to show amounts deferred during the year

Group-term life insurance. If you paid for group-term life

under an NQDC plan subject to section 409A. For more

insurance over $50,000 for an employee or a former employee,

information, see Notice 2008-115, 2008-52 I.R.B. 1367,

you must report the taxable cost of excess coverage,

available at irb/2008-52_IRB/ar10.html. If you

determined by using the table in section 2 of Pub. 15-B, in

report section 409A deferrals, show the amount in Box 12 using

boxes 1, 3, and 5 of Form W-2. Also, show the amount in box

code Y.

12 with code C. For employees, you must withhold social

Income included under section 409A from an NQDC plan will

security and Medicare taxes, but not federal income tax. Former

be reported in box 1, and in box 12 using code Z. This income

employees must pay the employee part of social security and

is also subject to an additional tax reported on Form 1040. For

Medicare taxes on the taxable cost of group-term life insurance

more information on amounts includible in gross income, see

over $50,000 on Form 1040. You are not required to collect

Notice 2008-113, 2008-51 I.R.B. 1305, available at

those taxes. However, you must report the uncollected social

gov/irb/2008-51_IRB/ar12.html, and for more information on

security tax with code M and the uncollected Medicare tax with

reporting and wage withholding on amounts includible in gross

code N in box 12 of Form W-2.

income, see Notice 2008-115.

Health savings account (HSA). An employer’s contribution

Railroad employers. Railroad employers must file Form W-2

(including an employee’s contributions through a cafeteria plan)

to report their employees’ wages and income tax withholding in

to an employee’s HSA is not subject to federal income tax

boxes 1 and 2. Electronic reporting may be required; see

withholding, or social security, Medicare, or railroad retirement

Electronic reporting on page 3. If you have both FICA

taxes (or FUTA tax) if it is reasonable to believe at the time of

employees and RRTA employees, you must file a separate

the payment that the contribution will be excludable from the

Form W-3 to transmit the Forms W-2 for each group of

employee’s income. However, if it is not reasonable to believe

employees.

at the time of payment that the contribution will be excludable

from the employee’s income, employer contributions are subject

If an employee is covered by social security and Medicare,

to federal income tax withholding and social security and

also complete boxes 3, 4, 5, 6, and 7 of Form W-2 to show the

Medicare taxes (or railroad retirement taxes, if applicable) and

social security and Medicare wages and the amounts withheld

FUTA tax and must be reported in boxes 1, 3, and 5 (and on

for social security and Medicare taxes. On the Form W-3 used

Form 940, Employer’s Annual Federal Unemployment (FUTA)

to transmit these Forms W-2, check the “941” box in box b.

Tax Return).

For employees covered by RRTA tax, you also must report

You must report all employer contributions to an HSA in box

the Tier I and Tier II taxes withheld in box 14 of Form W-2.

12 of Form W-2 with code W. Employer contributions to an HSA

Label them “Tier I tax” and “Tier II tax.” Boxes 3, 4, 5, 6, and 7

that are not excludable from the income of the employee also

apply only to covered social security and Medicare employees

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

and are not to be used to report railroad retirement wages and

taxes. On the Form W-3 used to transmit these Forms W-2,

An employee’s contributions to an HSA (unless made

check the “CT-1” box in box b.

through a cafeteria plan) are includible in income as wages and

are subject to federal income tax withholding and social security

Repayments. If an employee repays you for wages received

and Medicare taxes (or railroad retirement taxes, if applicable).

in error, do not offset the repayments against current year’s

Employee contributions are deductible, within limits, on the

wages unless the repayments are for amounts received in error

employee’s Form 1040. For more information about HSAs, see

in the current year. Repayments made in the current year, but

Notice 2004-2 and Notice 2004-50. You can find Notice 2004-2

related to a prior year or years, must be repaid in gross, not net,

on page 269 of Internal Revenue Bulletin 2004-2 at

and require special tax treatment by employees in some cases.

gov/pub/irs-irbs/irb04-02.pdf. You can find Notice 2004-50 on

You may advise the employee of the total repayments made

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

Instructions For Forms W-2 And W-3 - 2010 Page 6

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