Here’s help with your W-2s

Back in the day, completing employees’ W-2s was easy. Cafeteria plans hadn’t yet been invented, employers picked up 100% of employees’ health insurance premiums and employees got a defined benefit pension.

OK, now reality. The work environment has become much more complicated, which means that W-2s are complicated, too. To help you along with your W-2 travails, we’ve created what we think is a pretty typical scenario and completed a W-2.

Taxpayer Emma

Emma is divorced, 42 years old and is paid biweekly. She claims two withholding allowances on her W-4. Emma and her ex have no kids. Last year, she was paid $85,000, plus a $15,000 bonus.

She deferred 3% of her regular salary ($2,550) into her 401(k) account, which her employer, Computer Consultancy, Inc., matched 100%.

She contributed $3,500, pretax, toward her major medical health insurance; Computer Consultancy paid the rest ($7,350).

She deferred $500, also on a pretax basis, for dental insurance under a stand-alone policy and another $200 into her health flexible spending account; Computer Consultancy didn’t match her health FSA contribution.

She received group-term life insurance equal to twice her regular salary ($170,0000) for which she paid nothing.

Emma’s W-2

Emma’s Box 1 amount is 93,394.00:

$100,000.00 (regular wages + bonus) + 144.00 (group-term life insurance in excess of $50,000)* = $100,144.00

– $2,550.00 (401(k) contribution)

– $4,200.00 (major medical + dental + FSA contributions)

= $93.394.00

* The cost of group-term life insurance in excess of $50,000 is taxable and must be shown in Boxes 1, 3 and 5. It isn’t subject to income tax withholding. To figure the cost of the excess amount:

From Table 2-2 in Pub. 15-B, the cost per $1,000 of insurance for an employee between the ages of 40 and 44 is 10¢.

Emma’s $170,000 in insurance is reduced by $50,000. The yearly cost of coverage is 10¢ × 120 × 12 = $144.

 

Emma’s Box 2 amount is 13,814.50:

$10,514.50 (withholding on regular wages) + $3,300.00 (22% withholding on bonus) = $13,814.50

 

Emma’s Box 3 amount is: 98,494.00

$100,000.00 (regular wages + bonus) + $2,550.00 (401(k) pretax contribution) + $144.00 (group-term life insurance in excess of $50,000) = $102,694.00

– $4,200.00 (major medical + dental + FSA contributions)

= $98,494.00

 

Emma’s Box 4 amount is: 6,106.63

$98,494.00 × 6.2% = $6,106.63

 

Emma’s Box 5 amount is: 98,494.00

$100,000.00 (regular wages + bonus) + $2,550.00 (401(k) pretax contribution) + $144.00 (group-term life insurance in excess of $50,000) = $102,694.00

-$ 4,200.00 (major medical + dental + FSA contributions)

= $98,494.00

 

Emma’s Box 6 amount is: 1,428.16

$98,494.00 × 1.45% = $1,428.16

 

Computer Consultancy makes the following entries in Box 12:

  • Line 12a: C 144.00 (excess group-term life insurance)
  • Line 12b: D 2,550.00 (pretax 401(k) contribution)
  • Line 12c: DD 10,850.00 (total major medical benefits, not including the stand-alone dental contributions or the health FSA contribution)

Computer Consultancy checks the Retirement Plan checkbox in Box 13, because Emma participates in its 401(k) plan

So, when we put this altogether: