Author Topic: Incorrect W-2s?  (Read 5053 times)

SailAway

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Incorrect W-2s?
« on: December 08, 2014, 04:55:06 PM »
I'm embarrassed to admit I haven't paid much attention to taxes in the past. But this year I got more serious about FI and have been doing some tax planning. So I pulled up last year's W-2 and last pay stub. And I think my W-2 is wrong. It shows my 401a contribution included as taxable income. (It's not a Roth).

2013 W-2 box 1 56,409.11

Last pay stub of 2013 shows gross earnings 57,772.55
HSA 1170.00
Accident 193.44
PERF (my 401a) 1733.20

Shouldn't my W-2 have this deducted, like that income never happened? Or am I reading this wrong?

trugrit03

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Re: Incorrect W-2s?
« Reply #1 on: December 08, 2014, 05:12:21 PM »
What are you seeing in box 13 and 12A-D? I'm thinking in 12 you should have $1,733.20 with code "D" to represent the 401a salary deferral.

SailAway

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Re: Incorrect W-2s?
« Reply #2 on: December 08, 2014, 05:18:33 PM »
Box 12-W 1770 (employer contribution to HSA?)
Box 12-DD 2745 (cost of employer sponsored healthcare?)
Box 13 Retirement plan X (no amount)
All others blank

MDM

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Re: Incorrect W-2s?
« Reply #3 on: December 08, 2014, 05:31:27 PM »

trugrit03

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Re: Incorrect W-2s?
« Reply #4 on: December 08, 2014, 05:35:12 PM »
Sounds weird. A quick Google search gave me a PDF that talked about how employers should record a Public Employee's Retirement Account on a W-2, but I'm not sure if it applies to this case. That PDF states that the employer should NOT record the contributions in 12. It says that it MAY be recorded under box 14. But here's the kicker, it says the employer isn't REQUIRED to record it in Box 14. That's bizarre to me, but tax rules ain't always logical. Anything in box 14? If not, it sounds like you might not have claimed the PERF deduction and you'll want to amend your taxes.


SailAway

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Re: Incorrect W-2s?
« Reply #5 on: December 08, 2014, 06:17:14 PM »
Might want to check http://www.in.gov/inprs/pre-tax_voluntary_contributions.htm or http://www.in.gov/inprs/perfmbrhandbooktwopartbenefits.htm or similar, depending on your exact situation.
Yes, I've looked at those. This is my mandatory contribution, my employer does not pay it for me. It's my understanding that the mandatory 3% is always pre-tax. Voluntary may be post-tax or pre-tax in a few select circumstances.

Sounds weird. A quick Google search gave me a PDF that talked about how employers should record a Public Employee's Retirement Account on a W-2, but I'm not sure if it applies to this case. That PDF states that the employer should NOT record the contributions in 12. It says that it MAY be recorded under box 14. But here's the kicker, it says the employer isn't REQUIRED to record it in Box 14. That's bizarre to me, but tax rules ain't always logical. Anything in box 14? If not, it sounds like you might not have claimed the PERF deduction and you'll want to amend your taxes.
Box 14 is empty. Yes, those wacky public employee pensions. I'm guessing that PDF was referencing a defined benefit? My plan is a hybrid. Part defined benefit and part 401a.

MDM

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Re: Incorrect W-2s?
« Reply #6 on: December 08, 2014, 06:39:18 PM »
Might want to check http://www.in.gov/inprs/pre-tax_voluntary_contributions.htm or http://www.in.gov/inprs/perfmbrhandbooktwopartbenefits.htm or similar, depending on your exact situation.
Yes, I've looked at those. This is my mandatory contribution, my employer does not pay it for me. It's my understanding that the mandatory 3% is always pre-tax. Voluntary may be post-tax or pre-tax in a few select circumstances.
A call to your HR department seems in order, unless you can decipher how this part from the second link above applies to you:
Quote
MANDATORY CONTRIBUTIONS

State law requires that three percent (3%) of an employee’s gross wages (regular and overtime pay) must be contributed to fund the ASA.

If you work for the State, a quasi-governmental agency, or a university, the three percent (3%) is paid by your employer before taxes are calculated on your wages.

For all other employers, the three percent (3%) may be deducted from your paycheck, or your employer may pay all or part of this mandatory three percent (3%) contribution. The governing body of the employer makes this decision, and may change it at any time.

Sure isn't clear to me whether it is pre-tax or post-tax, just that it is "mandatory" - good luck!

SailAway

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Re: Incorrect W-2s?
« Reply #7 on: December 08, 2014, 06:55:17 PM »
Might want to check http://www.in.gov/inprs/pre-tax_voluntary_contributions.htm or http://www.in.gov/inprs/perfmbrhandbooktwopartbenefits.htm or similar, depending on your exact situation.
Yes, I've looked at those. This is my mandatory contribution, my employer does not pay it for me. It's my understanding that the mandatory 3% is always pre-tax. Voluntary may be post-tax or pre-tax in a few select circumstances.
A call to your HR department seems in order, unless you can decipher how this part from the second link above applies to you:
Quote
MANDATORY CONTRIBUTIONS

State law requires that three percent (3%) of an employee’s gross wages (regular and overtime pay) must be contributed to fund the ASA.

If you work for the State, a quasi-governmental agency, or a university, the three percent (3%) is paid by your employer before taxes are calculated on your wages.

For all other employers, the three percent (3%) may be deducted from your paycheck, or your employer may pay all or part of this mandatory three percent (3%) contribution. The governing body of the employer makes this decision, and may change it at any time.

Sure isn't clear to me whether it is pre-tax or post-tax, just that it is "mandatory" - good luck!
Thanks. Yeah I guess it doesn't exactly, specifically say "pre" tax. It does say somewhere that if the employer pays the contributions then they have not been taxed. Tomorrow I think I will call PERF first and ask. Although that is like banging my head against the wall.  Then I will discuss with HR and the clerk-treasurer, which is like banging my head against a steel trap lined with nails. The number of times my payroll has been messed up....you have no idea.

SailAway

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Re: Incorrect W-2s?
« Reply #8 on: December 10, 2014, 02:55:16 PM »
Welp. Talked to the state and the town. All my contributions have been made after tax. Not Roth, just after tax. So I'll still be taxed on earnings when I withdraw. Apparently after tax mandatory contributions are unusual but they are allowed and that's how the clerk-treasurer decided to make them. I'm not happy, but it is what it is.

However, this on the website concerns me:

Any contributions to your ASA made with after-tax dollars are considered “tax basis” because you have already paid taxes on those dollars. Mandatory contributions paid by your employer were not taxed at the time they were paid. Therefore, they do not create “tax basis”. Upon retirement, any after-tax contribution (your tax basis) is reported by PERF as non-taxable on the IRS Form 1099-R issued to retired members and the IRS. However, it is important to note that your tax basis is recoverable under very specific IRS rules. The following briefly outlines the basis recovery rules applicable to your situation.

You can elect to receive a total distribution of your ASA at the same time you begin receiving your monthly pension benefit. However, if you elect to do so, federal tax law does not allow you to immediately recover your entire basis when you receive your ASA. Instead, part of the basis has to be allocated to the monthly pension benefits. The basis allocated to the monthly pension payment is divided up and recovered over a mandatory number of monthly payments, as determined by applicable IRS regulations. Therefore, a portion of each monthly benefit paid to you is non-taxable, for as long as basis remains.

This division of the basis is required because the IRS has issued a private letter ruling to PERF concluding that the ASA and monthly pension benefits payable to you do not constitute separate accounts. The consequence of this ruling is that, upon retirement, basis from contributions to the ASA must be partially allocated to your pension benefit, as we have described above. One exception to this basis allocation rule is also relevant: a special provision of federal tax law permits you to immediately recover any tax basis that you may have had in your ASA on Dec. 31, 1986. The post-1986 basis, however, may be partially recovered with the remainder allocated to your monthly retirement benefits.


Can anyone decipher for me? I can't find any more about the private letter ruling. It sounds like a portion of my contributions will have to be rolled into my defined benefit.

beltim

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Re: Incorrect W-2s?
« Reply #9 on: December 10, 2014, 03:21:23 PM »
You can elect to receive a total distribution of your ASA at the same time you begin receiving your monthly pension benefit. However, if you elect to do so, federal tax law does not allow you to immediately recover your entire basis when you receive your ASA. Instead, part of the basis has to be allocated to the monthly pension benefits. The basis allocated to the monthly pension payment is divided up and recovered over a mandatory number of monthly payments, as determined by applicable IRS regulations. Therefore, a portion of each monthly benefit paid to you is non-taxable, for as long as basis remains.

Can anyone decipher for me? I can't find any more about the private letter ruling. It sounds like a portion of my contributions will have to be rolled into my defined benefit.

I read that as only applying if you take all of your ASA money at once, when you begin your pension.  If you take yearly withdrawals, it shouldn't affect you.

SailAway

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Re: Incorrect W-2s?
« Reply #10 on: December 10, 2014, 03:38:23 PM »
You can elect to receive a total distribution of your ASA at the same time you begin receiving your monthly pension benefit. However, if you elect to do so, federal tax law does not allow you to immediately recover your entire basis when you receive your ASA. Instead, part of the basis has to be allocated to the monthly pension benefits. The basis allocated to the monthly pension payment is divided up and recovered over a mandatory number of monthly payments, as determined by applicable IRS regulations. Therefore, a portion of each monthly benefit paid to you is non-taxable, for as long as basis remains.

Can anyone decipher for me? I can't find any more about the private letter ruling. It sounds like a portion of my contributions will have to be rolled into my defined benefit.

I read that as only applying if you take all of your ASA money at once, when you begin your pension.  If you take yearly withdrawals, it shouldn't affect you.

I plan on separating from service when I'm 50. I can't start receiving my pension until I'm 60. I was planning on rolling my 401a into my IRA.