Vision Payroll

January 28, 2011

Question of the Week: Why Don’t My Massachusetts Wages Equal My Federal Wages on My W-2?

Why Don’t My Massachusetts Wages Equal My Federal Wages on My W-2?
Why Don’t My Massachusetts Wages Equal My Federal Wages on My W-2?
This week’s question comes from Jordan, a company controller. For most employees in our company, the Massachusetts wages reported on the Form W-2 equal the federal wages on the Form W-2. My Massachusetts wages, however, are higher than my federal wages. Why don’t my Massachusetts wages equal my federal wages on my W-2? Answer: There may be several reasons why Massachusetts wages don’t equal federal wages on a Form W-2.

Differences Between Federal Wages and Massachusetts Wages on Form W-2

Although Massachusetts generally follows federal law on income taxation of wage benefits, certain items may increase or decrease Massachusetts wages as compared to federal wages. Among the differences are the following:

  1. Employee and employer contributions to Massachusetts governmental unit §414(h) retirement plans are taxable for Massachusetts purposes and not for federal purposes,
  2. The value of an employer-provided monthly transit pass in excess of $120 and not in excess of $230 per month is taxable for Massachusetts purposes and not for federal purposes,
  3. Imputed income from cost of health insurance coverage of former spouses and non-dependent children as required under Massachusetts law is taxable for federal purposes and not for Massachusetts purposes (prior to the change included in the Patient Protection and Affordable Care Act),
  4. Employee contributions to cafeteria plans for the benefit of a same-sex spouse and that spouse’s children when the same-sex spouse or that spouse’s children do not qualify as a dependent of the employee are taxable for federal purposes and not for Massachusetts purposes,
  5. Qualified tuition reduction that an educational organization provides to the same-sex spouse of an employee is taxable for federal purposes and not for Massachusetts purposes, and
  6. Employer contributions to an accident or health insurance plan for the benefit of a same-sex spouse and that spouse’s children when the same-sex spouse or that spouse’s children do not qualify as a dependent of the employee are taxable for federal purposes and not for Massachusetts purposes.

Contact Vision Payroll Now

Contact Vision Payroll if you have further questions on the differences between federal wages and Massachusetts wages on Form W-2.

January 17, 2011

2010 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

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 10, dependent care benefits.

2010 Annual Exclusion Limit Is $5,000

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in box 1 and box 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in box 1 and box 5 and box 3, subject to the wage limitation.

Box 11, Nonqualified Plans Is the Next Topic

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 17, 2010

2009 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

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 10, dependent care benefits.

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation.

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2009 Form W-2.

January 25, 2009

2008 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

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 10, dependent care benefits.

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation.

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2008 Form W-2.

December 5, 2008

Question of the Week: Why Didn’t My FICA Tax Deduction Stop?

This week’s question comes from Janet, a sales rep: I read before that the wage base for 2008 was $102,000. I’ve made over $104,000, but FICA tax is still being withheld. Why didn’t my FICA tax deduction stop? Answer: Even though your gross wages are over $104,000, the FICA tax deduction doesn’t stop until FICA taxable wages reach $102,000 and FICA tax withheld reaches $6,324. Some wage deductions such as cafeteria or §125 plan deductions reduce the amount of FICA taxable wages. So, even though your gross earnings are over $102,000, FICA tax must be withheld until the maximum withholding is reached. Contact Vision Payroll if you have any questions on the Social Security wage base.

October 6, 2008

IRS Issues Notice on FSA Distributions to Reservists

The IRS recently issued Notice 2008-82 which provides guidance on the recently enacted §114 of the Heroes Earnings Assistance and Relief Tax Act of 2008 (the HEART Act). The HEART Act amended §125 of the Internal Revenue Code of 1986 (IRC) to allow distributions of unused amounts in a Health Flexible Spending Arrangement (Health FSA, also called a 125 or cafeteria plan) to reservists ordered or called to active duty. In addition to providing guidance on “qualified reservist distributions” or QRDs, the Notice provides a transition rule allowing plans to be retroactively amended for QRDs made before January 1, 2010. Contact Vision Payroll if you have any questions on Notice 2008-82.

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