Vision Payroll

January 2, 2011

2010 Form W-2 Tips, Part 4, Box 3 Social Security Wages

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 3, social security wages.

Social Security Earnings Help Determine the Amount of Social Security Benefits

Box 3 shows the amount wages paid subject to social security tax. It does not include social security tips reported in box 7 or allocated tips reported in box 8. Wages should be reduced by amounts withheld for non-taxable benefits elected under §125 plans, certain clergy housing allowances, and third-party sick pay after the end of six calendar months after the calendar month that the employee last worked for the employer. For 2010, the combined total of boxes 3 and 7 cannot exceed $106,800. Since social security benefits are based on the amount of social security wages reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.

Box 4, Social Security Tax Withheld Is the Next Topic

The next topic in this continuing series will be Box 4, social security tax withheld. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 2, 2010

2009 Form W-2 Tips, Part 4, Box 3 Social Security Wages

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 3, social security wages.

Box 3 shows the amount wages paid subject to social security tax. It does not include social security tips reported in box 7 or allocated tips reported in box 8. Wages should be reduced by amounts withheld for non-taxable benefits elected under §125 plans, certain clergy housing allowances, and third-party sick pay after the end of six calendar months after the calendar month that the employee last worked for the employer. For 2009, the combined total of boxes 3 and 7 cannot exceed $106,800. Since social security benefits are based on the amount of social security wages reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.

The next topic in this continuing series will be Box 4, social security tax withheld. Contact Vision Payroll with any questions on the 2009 Form W-2.

February 6, 2009

Question of the Week: Can You Tell Me More about Statutory Employees?

This week’s question comes from Carolyn, a business owner. I read recently about statutory employees and would like to find out if some of our new hires would qualify as statutory employees. Can you tell me more about statutory employees? Answer: Common law considers some workers employees and some independent contractors. By statute, some independent contractors are treated as employees for employment tax purposes.

There are four categories of independent contractors that might be statutory employees:

  1. A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.
  2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
  3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
  4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity.

If the independent contractor must perform the services personally as an explicit or implicit clause of the service contract, if the independent contractor does not have a substantial investment in the non-transportation facilities property and equipment, and the services are performed for the same payer on a continuing basis, then the payer must withhold social security and Medicare tax from payments to contractors.

For workers in categories 1 and 4 above who have payments subject to social security and Medicare tax under these rules, the payments are also considered wages for federal unemployment (FUTA) purposes. Payments to workers in categories 2 and 3 above are never considered wages for FUTA purposes.

Payments to statutory employees are never subject to federal income tax withholding.

Report payments to statutory employees on Form W-2, box 1, box 3 (to the wage limit), and box 5. Be sure to check the box 13 “Statutory employee” checkbox on the Form W-2. Statutory employees report the amount from Form W-2, box 1 on Form 1040, Schedule C, line 1 and complete the checkbox on that line. They may also deduct related business expenses on Schedule C, to the extent allowable by law.

Contact Vision Payroll if you have any questions on statutory employees.

January 6, 2009

2008 Form W-2 Tips, Part 4, Box 3 Social Security Wages

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 3, social security wages.

Box 3 shows the amount wages paid subject to social security tax. It does not include social security tips reported in box 7 or allocated tips reported in box 8. Wages should be reduced by amounts withheld for non-taxable benefits elected under §125 plans, certain clergy housing allowances, and third-party sick pay after the end of six calendar months after the calendar month that the employee last worked for the employer. For 2008, the combined total of boxes 3 and 7 cannot exceed $102,000. Since social security benefits are based on the amount of social security wages reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.

The next topic in this continuing series will be Box 4, social security tax withheld. Contact Vision Payroll with any questions on the 2008 Form W-2.

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