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PDtax
PDtax, CPA firm owner
Category: Social Security
Satisfied Customers: 1869
Experience:  32 years tax and professional advice in all matters money
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How does deferred income affect social security payments? I

Resolved Question:

How does deferred income affect social security payments? I am planning to retire at the end of this year as my company begins to pay out in the month of February following retirement. I am concerned that this distribution from my deferred comp account might be considered as income thereby reducing or eliminating any social security payments. I'm confused. Thanks!
Submitted: 9 months ago.
Category: Social Security
Expert:  PDtax replied 9 months ago.

PDtax :

Welcome to the site. I'm PDtax, and will be helping you today. Thanks for asking for me.

PDtax :

The type of deferred compensation drives the social security treatment. Was this income previously reported to you on W-2, but payment deferred to today? Or was it part of a deferred comp plan?

Customer:

I believe the income was reported as deferred on my W2; however, I don't have it in front of me at the moment.

PDtax :

If this was reported to you as wages in a prior year, or even now, it it treated as wages in the year reported to you, and never again (https://secure.ssa.gov/poms.nsf/lnx/0301401090):

PDtax :

RS 01401.090 Nonqualified Deferred Compensation Plans
A. POLICY — GENERAL

Beginnning 1984, amounts to or from a nonqualified deferred compensation plan are wages for social security purposes when:


services are performed; or, if later,


when the employee's right to payment is no longer subject to substantial risk of forfeiture, i.e., when conditions required for the payment are met.

Once a deferred compensation amount is credited as wages in a given period, it is never again counted for social security purposes in any other period.

PDtax :

So, if it was reported as W-2, it can't be counted twice as income.

PDtax :

Just confirm it is treated as wages already, and you should be fine.

PDtax :

Is there anything else I can help with today?

PDtax :

If not, please accept our thanks for using Just Answer. Positive feedback closes out your question. I'm PDtax.

Customer:

So I need to check my W2 to see if, in fact, it was reported. When I discussed with the company administering the plan, they said that I would receive a W2 and that they would take out the applicable taxes (Fed/State). They were unsure how my filing would be impacted - if at all.

PDtax :

Is this a 457 plan?

Customer:

I honestly don't know - sorry to say.

Customer:

I should have had all this together before I joined Just Answer.

PDtax :

A review of your W-2 for a prior year is in order. Check line 11 (nonqualified plans) and line 12 (qualified plans, like a 401(k)) to see what was withheld from your wages and the tax treatment.

PDtax :

Once you can review the form, you can make the determination. If the amount going to your deferred compensation was in your line 1 wages, then it will not affect your earnings limit for 2014. Otherwise, it will.

PDtax :

Thanks again fro asking at Just Answer. I'm PDtax.

PDtax, CPA firm owner
Category: Social Security
Satisfied Customers: 1869
Experience: 32 years tax and professional advice in all matters money
PDtax and 4 other Social Security Specialists are ready to help you

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