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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3837
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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100% owner/officer/employee of C Corporation (highly compensated

Resolved Question:

100% owner/officer/employee of C Corporation (highly compensated employee) received $5000 fringe benefits under health reimbursement plan. Only other employee received zero.
Question1) add the $5000 to taxable wages in box 1 of W2--not subject to social security or medicare?
Question 2) any entry in box 12 or box 14?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi ... don't shoot the messenger here, but ...

NPVAdvisor :

From the IRS guide to fringe benefits,

NPVAdvisor :

Under IRC sections 105 and 106, employer-provided health benefits, including reimbursement and insurance, are generally excluded from the income of employees. This applies to any employer-paid system, whether the benefit is provided directly (i.e., through self-insurance) to employees or through an insurance provider or a trust. However, if the plan discriminates in favor of highly compensated employees, the amounts paid to those employees are subject to Federal income tax. IRC § 105(h)

NPVAdvisor :

Question, everything I'm seeing says that this would be subject to SS and medicare, what's your source on your Q, lets see if we can reconcile

Customer:

OK just what I thought. . . now, do I need to enter anything in box 14? or box 12?

NPVAdvisor :

Just one sec

NPVAdvisor :

The entire amount reported as wages in
Boxes 1, 3 and 5. Taxes withheld are
reported in Boxes 2, 4, and 6.

NPVAdvisor :

Nothing in box 12 - Just to document (using process of elimination, here are the codes:

NPVAdvisor :

  • . Code A – Uncollected Social Security or RRTA tax on tips. Include this amount as part of your total tax on Form 1040.

  • Code B – Uncollected Medicare tax on tips. Include this amount as part of your total tax on Form 1040.

  • Code C – Taxable benefit of group term-life insurance over $50,000. This amount is already included as part of your taxable wages in Boxes 1, 3, and 5.

  • Code D – Non-taxable elective salary deferrals to a 401(k) or SIMPLE 401(k) retirement plan.

  • Code E – Non-taxable elective salary deferrals to a 403(b) retirement plan.

  • Code F – Non-taxable elective salary deferrals to a 408(k)(6) SEP retirement plan.

  • Code G – Non-taxable elective salary deferrals and non-elective employer contributions to a 457(b) retirement plan.

  • Code H – Non-taxable elective salary deferrals to a 501(c)(18)(D) tax-exempt plan.

  • Code J – Non-taxable sick pay. This amount is not included in taxable wages in Boxes 1, 3, or 5.

  • Code K – Excise tax (equal to 20%) on excess "golden parachute" payments. Include this amount as part of your total tax on Form 1040.

  • Code L – Non-taxable reimbursements for employee business expenses.

  • Code M – Uncollected Social Security or RRTA tax on taxable group term life insurance over $50,000 for former employees. Include this amount as part of your total tax on Form 1040.

  • Code N – Uncollected Medicare tax on taxable group term life insurance over $50,000 for former employees. Include this amount as part of your total tax on Form 1040.

  • Code P – Non-taxable reimbursements for employee moving expenses, if the amounts were paid directly to the employee.

  • Code Q – Non-taxable combat pay. Some individuals may elect to include combat pay when calculating their Earned Income Credit.

  • Code R – Employer contributions to an Archer Medical Savings Account. This amount should be reported on IRS Form 8853.

  • Code S – Non-taxable salary deferral to a 408(p) SIMPLE retirement plan.

  • Code T – Employer paid adoption benefits. This amount is not included in Box 1 wages. You must use IRS Form 8839 to calculate the taxable and non-taxable portion of these adoption benefits.

  • Code V – Income from the exercise of non-statutory stock options. This amount is already included as taxable income in Boxes 1, 3, and 5. However, you will still need to report separately the sale of any stock options on Schedule D.

  • Code W – Employer contributions to your Health Savings Account. Report this amount on IRS Form 8889.

  • Code Y – Salary deferrals under 409A non-qualified deferred compensation plan.

  • Code Z – Income received under 409A non-qualified deferred compensation plan. This amount is already included in taxable wages in Box 1. This amount is subject to an additional tax of 20% plus interest as part of your total tax on Form 1040.

  • Code AA – After-tax contributions to a Roth 401(k) retirement plan.

  • Code BB – After-tax contributions to a Roth 403(b) retirement plan.

  • Code DD – Reports the cost of health insurance provided through your employer.

  • Code EE After-tax contributions to a Roth 457(b) retirement plan offered by government employers.

NPVAdvisor :

Osrry for the data dump, but easier to show that none of the codes apply

NPVAdvisor :

(Sorry)

NPVAdvisor :

Box 14 is purely informational -

NPVAdvisor :

Box 14 (Other tax information( couuld be used to note 5000 of taxable fringe benefit)

NPVAdvisor :

From EA XXXXX XXXXX:

NPVAdvisor :

Your employer may report additional tax information in Box 14. If any amounts are reported, they will have a brief description of what the amounts are for. For example, union dues, employer-paid tuition assistance, or after-tax contributions to a retirement plan will be reported here. Some employers report certain state and local taxes in Box 14, such as State Disability Insurance (SDI) premiums.

NPVAdvisor :

Hope this helps:

NPVAdvisor :

Lane

NPVAdvisor :

Once more to recap, operating statute here is : IRC § 105(h) (reimbursement plans discrminating in favor of HC's)

NPVAdvisor :

And here's a copy of the IRS' "Taxable Fringe Benefit Guide" http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf

NPVAdvisor :

 


Thanks,


Lane


 


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NPVAdvisor :

Can I help you with anything else today?

NPVAdvisor :

From my end it looks like you have been initializing for about 3 minutes, but you never come into the chat ... what I'll do if you don't appear here in the next few minutes id switch to the Question and Answer mode ... maybe that will help ... We can still continue a dialogue, just not in real-time as here ... i

NPVAdvisor :

Before I switch over, however, just to be sure you saw it ... Nothing in box 12, none of the code apply, as can see here. and you CAN use box 14 essentially to footnote that 5000 was taxable as a result of IRC § 105(h)

NPVAdvisor :

Chat CAN be a little glitchy sometimes. Switching over now ... you can ask any remaining questions there

Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Customer: replied 1 year ago.

Sorry, I had to leave chat for a while. I interpreted Pub 15-B, Fringe Benefit Overview, Table 2-1 to mean that these fringe benefits would not be subject to social security and medicare taxes. Right or wrong?

Customer: replied 1 year ago.

Did you get my reply? I interpreted Pub 15-B, Fringe Benefit Overview, Table 2-1 to mean that these fringe benefits would not be subject to social security and medicare taxes. Right or wrong?

Expert:  Lane replied 1 year ago.

Now this one is opening for me, so I'll post here as well...

You are correct.

From 15-B (2012):

Exception for highly compensated employees. If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes.

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3837
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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