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Common Errors on Form W 2 – Incorrect Codes

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Information about Common Errors on Form W 2 – Incorrect Codes
Business & Mgmt

Published on February 18, 2014

Author: OConnorDavies

Source: slideshare.net

Description

During recent IRS examinations of the Form 5500, and compliance projects initiated by the Employee Plans (EP) Customer Service Unit (CSU), IRS Agents have identified several instances of employers using incorrect codes on the annual Form W-2, Wage and Tax Statement.

The IRS wants the correct retirement plan information reported because employees need the correct information in determining their deductions and credits for purposes of their tax return. In addition, the information is also used by the IRS to determine whether employers are complying with income and employment tax reporting requirements.

Get additional information on Form W-2 reporting issues from - NY CPA Firm, NYC, Small business accounting
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December 2013 Employee Benefit Plan Considerations Common Errors on Form W-2 – Incorrect Codes For Retirement Plans Louis F. LiBrandi, Principal During recent IRS examinations of the Form 5500, and compliance projects initiated by the Employee Plans (EP) Customer Service Unit (CSU), IRS Agents have identified several instances of employers using incorrect codes on the annual Form W-2, Wage and Tax Statement. Louis F. LiBrandi Principal llibrandi@odpkf.com 212.286.2600 The IRS wants the correct retirement plan information reported because employees need the correct information in determining their deductions and credits for purposes of their tax return. In addition, the information is also used by the IRS to determine whether employers are complying with income and employment tax reporting requirements. The IRS indicated Boxes 12 and 13 contain most of the reporting errors. Specifically, Box 12 Code D – which is used to report 401(k) contributions, incorrectly included: 403(b) and 457(b), or nonqualified plan amounts; Code E – used for reporting elective deferrals made under a 403(b) salary reduction agreement - was being used even though the employer did not maintain a 403(b) plan; employers failed to use Code D for contributions made to a SIMPLE 401(k) plan. Box 13 indicates whether an employee was an active participant for any part of the year in a qualified pension, profit sharing or stock bonus plan under Code Sections §401(a), an annuity plan under §403(a), a §403(b) annuity contract or custodial account, a simplified employee pension (SEP), SIMPLE retirement account, certain trust arrangements, or a plan for federal, state, or local government employees or by an agency or instrumentality thereof, other than a §457(b) plan. When the box is marked, it lets the recipient know that depending on their filing status and modified adjustment gross income, whether they are entitled to a deduction for any part of a traditional IRA contribution. Active participant Generally, an employee is an active participant if covered by a: Defined contribution plan (for example, a 401(k) plan) for any tax year and is credited with any contributions or forfeitures, or

Contact: Defined benefit plan for any tax year that the employee is eligible to participate. New York, NY 212.286.2600 212.867.8000 This IRS indicates the retirement plan box should not be marked if your company only has non-qualified or 457(b) plans. Harrison, NY 914.381.8900 If you would like more information or have any questions, please contact Louis F. LiBrandi at (212) 286-2600; llibrandi@odpkf.com or Tim Desmond at (914) 3818900; tdesmond@odpkf.com. Stamford, CT 203.323.2400 About Our Practice: Paramus, NJ 201.712.9800 New Windsor, NY 845.220.2400 Wethersfield, CT 860.257.1870 O'Connor Davies, LLP is a full service Certified Public Accounting and consulting firm that has a long history of serving clients both domestically and internationally and providing specialized professional services of the highest quality. With roots tracing to 1891, six offices located in New York, New Jersey and Connecticut, and approximately 400 professionals including 70 partners, the Firm provides a complete range of accounting, auditing, tax and management advisory services. O’Connor Davies is ranked as number 39 in Accounting Today's 2012 "Top 100 Firms" in the United States. The Firm is also within the 20 largest accounting firms in the New York Metropolitan area according to Crain's New York Business and the Westchester and Fairfield County Business Journals. O’Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. IRS CIRCULAR 230 DISCLOSURE: To comply with IRS regulations, we are required to inform you that unless expressly stated otherwise, any discussion of U.S. federal tax issues in this correspondence (including any attachments) is not intended or written to be used, and cannot be used, (i) to avoid any penalties imposed under the Internal Revenue Code, or (ii) to promote, market, or recommend to another party any transaction or matter addressed herein.

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