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Reporting Back Pay

If employers do notify the SSA of this payment,

they should prepare a special report (with the

information noted below) and send it to:

The Internal Revenue Service (IRS) and the SSA consider

Social Security Administration

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

Office of Central Operations

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

Metro West

paid.

Attn: Back Pay (DERO) Analyst Staff

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

300 North Greene Street

ment, or electronic wage reports to report back pay as

Baltimore, MD 21202

wages in the year they actually pay the employee. The

SSA no longer accepts reports on tapes, cartridges, and

Be sure to send this special report to the above address

diskettes.

because the SSA handles it separately from other

reports.

Example. In 2009, Terry Morris earned wages of

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

If you paid the back pay award in the same tax

settlement of a back pay case against her employer that

year to which it applies, report the wages on that

TIP

covered the periods January 2004 through December

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

2008. Her employer properly reflected social security

wages of $106,800 and Medicare wages of $150,000 on

Example. In 2009, Judy Wilson received a salary of

her 2009 Form W-2.

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

However, if an employer did not include back pay wages

the period January through June 2009. Her employer prop-

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

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

tronically filed wage report, the employer should prepare a

Medicare on her 2009 Form W-2. No further action is

wage correction report, Form W-2c, Corrected Wage and

necessary.

Tax Statement, or electronically filed report, to add the

Information the SSA needs to properly credit back pay

back pay award to the wages previously reported.

under a statute (special report). After you complete the

special report, you or the employee should send it to the

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

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

ployer had prepared her 2009 Form W-2 reporting social

electronically) to the SSA for the year you pay the statutory

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

back pay to the employee. There is no statute of limitations

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

on the filing of the special report to enable the SSA to

correcting the 2009 Form W-2 would show previously

allocate the wages. The SSA needs the following informa-

reported social security and Medicare wages of $50,000

tion:

and the correct amount of $106,800 for social security and

$150,000 for Medicare.

1. The employer’s name, address, and employer identi-

fication number (EIN).

SSA treatment of back pay under a statute. If a back

2. A signed statement citing the federal or state statute

pay award is not made under a statute, the SSA credits

under which the payment was made. (If the statute is

back pay as wages in the year paid. However, when

not identified, the SSA will assume the payment was

awarded, the SSA credits back pay awarded under a

not under a statute and will not allocate to earlier

statute to the year(s) it should have been paid.

period(s).)

Under the law, the SSA credits back pay awarded under

a statute to an individual’s earnings record in the period(s)

3. The name and telephone number of a person to

the wages should or would have been paid. This is impor-

contact. (The SSA may have additional questions

tant because wages not credited to the proper year may

concerning the back pay case or the individual em-

result in lower social security benefits or failure to meet the

ployee’s information.)

requirements for benefits.

4. A list of employees receiving the payment and the

However, back pay under statute payments will remain

following information for each employee:

posted to the employee’s social security earnings record in

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

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

employer or employee notifies the SSA (in a separate,

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

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

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

c. The employee’s name (as shown on his or her

appropriate periods.

social security card).

Page 2

Publication 957 (May 2010)

Publication 957 - Reporting Back Pay And Special Wage Payments To The Social Security Administration Page 2

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