Instructions For Forms W-2 And W-3 - Wage And Tax Statement And Transmittal Of Wage And Tax Statements - 2017 Page 12
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33current year wages unless the repayments are for
Nonqualified deferred compensation plans. Section
amounts received in error in the current year. Repayments
409A provides that all amounts deferred under a
made in the current year, but related to a prior year or
nonqualified deferred compensation (NQDC) plan for all
years, must be repaid in gross, not net, and require
tax years are currently includible in gross income to the
special tax treatment by employees in some cases. You
extent not subject to a substantial risk of forfeiture and not
may advise the employee of the total repayments made
previously included in gross income, unless certain
during the current year and the amount (if any) related to
requirements are met. Generally, section 409A is effective
prior years. This information will help the employee
with respect to amounts deferred in tax years beginning
account for such repayments on his or her federal income
after December 31, 2004, but deferrals made before that
tax return.
year may be subject to section 409A under some
circumstances.
If the repayment was for a prior year, you must file
Form W-2c with the SSA to correct only social security
It is not necessary to show amounts deferred during the
and Medicare wages and taxes, and furnish a copy to the
year under an NQDC plan subject to section 409A. If you
employee. Do not correct "Wages, tips, other
report section 409A deferrals, show the amount in box 12
compensation" in box 1, or "Federal income tax withheld"
using code Y. For more information, see Notice 2008-115,
in box 2, on Form W-2c. Also, do not correct any
2008-52 I.R.B. 1367, available at
IRS.gov/irb/
Additional Medicare Tax withheld on the repaid wages
2008-52_IRB/ar10.html.
(reported with Medicare tax withheld in box 6) on Form
Income included under section 409A from an NQDC
W-2c. File the “X” return that is appropriate for the return
plan will be reported in box 1 and in box 12 using code Z.
on which the wages or compensation was originally
This income is also subject to an additional tax of 20%
reported (Forms 941-X, 943-X, 944-X, or CT-1X). Correct
that is reported on Form 1040. For more information on
the social security and Medicare wages and taxes for the
amounts includible in gross income and reporting
period during which the wages or compensation was
requirements, see Notice 2008-115 available at
IRS.gov/
originally paid. For information on reporting adjustments to
irb/2008-52_IRB/ar10.html. For information on correcting
Forms 941, 941-SS, 943, 944, or Form CT-1, see section
failures to comply with section 409A and related reporting,
13 of Pub. 15 (Circular E), the Instructions for Form
see Notice 2008-113, 2008-51 I.R.B. 1305, available at
CT-1X, or section 9 of Pub. 51 (Circular A).
IRS.gov/irb/2008-51_IRB/ar12.html; Notice 2010-6,
Tell your employee that the wages paid in error in
2010-3 I.R.B. 275, available at
IRS.gov/irb/2010-3_IRB/
a prior year remain taxable to him or her for that
ar08.html; and Notice 2010-80, 2010-51 I.R.B. 853,
TIP
year. This is because the employee received and
available at IRS.gov/irb/2010-51_IRB/ar08.html.
had use of those funds during that year. The employee is
See the Nonqualified Deferred Compensation
not entitled to file an amended return (Form 1040X) to
Reporting Example Chart.
recover the income tax on these wages. Instead, the
Railroad employers (not applicable to Forms W-2AS,
employee is entitled to a deduction (or a credit, in some
W-2CM, W-2GU, or W-2VI). Railroad employers must
cases) for the repaid wages on his or her Form 1040 for
file Form W-2 to report their employees' wages and
the year of repayment. However, the employee is entitled
income tax withholding in boxes 1 and 2. You must file a
to file an amended return (Form 1040X) to recover
separate Form W-3 to transmit the Forms W-2 if you have
Additional Medicare Tax on these wages, if any. Refer
employees covered under the Federal Insurance
your employee to Repayments in Pub. 525.
Contributions Act (FICA) (social security and Medicare)
and the Railroad Retirement Tax Act (RRTA).
Scholarship and fellowship grants. Give a Form W-2
to each recipient of a scholarship or fellowship grant only
For employees covered by RRTA tax. Check the
if you are reporting amounts includible in income under
“CT-1” checkbox on Form W-3, box b, “Kind of Payer,” to
section 117(c) (relating to payments for teaching,
transmit Forms W-2 for employees with box 1 wages and
research, or other services required as a condition for
box 2 tax withholding. Use Form W-2, box 14 to report the
receiving the qualified scholarship). Also see Pub. 15-A
RRTA compensation, Tier 1, Tier 2, Medicare, and any
and Pub. 970. These payments are subject to federal
Additional Medicare Tax withheld for each employee
income tax withholding. However, their taxability for social
covered by RRTA tax. Label them “RRTA compensation,”
security and Medicare taxes (or railroad retirement taxes,
“Tier 1 tax,” “Tier 2 tax,” “Medicare tax,” and “Additional
if applicable) depends on the nature of the employment
Medicare Tax.” Include tips reported by the employee to
and the status of the organization. See Students,
the employer in “RRTA compensation.”
scholars, trainees, teachers, etc., in section 15 of Pub. 15
For employees covered by social security and
(Circular E).
Medicare. Check the “941” checkbox on Form W-3, box
b, “Kind of Payer,” to transmit Forms W-2 for employees
Sick pay. If you had employees who received sick pay in
covered by social security and Medicare. Use Form W-2,
2017 from an insurance company or other third-party
boxes 3, 4, 5, 6, and 7 to report each employee’s social
payer and the third party notified you of the amount of sick
security and Medicare wages and taxes, including
pay involved, you may be required to report the
Additional Medicare taxes. These boxes are not to be
information on the employees' Forms W-2. If the
used to report railroad retirement compensation and
insurance company or other third-party payer did not
taxes.
notify you in a timely manner about the sick pay
payments, it must prepare Forms W-2 and W-3 for your
Repayments. If an employee repays you for wages
received in error, do not offset the repayments against
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General Instructions for Forms W-2 and W-3 (2017)
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