6 Things you do NOT want to omit from your employees’ W2 forms
Our payroll processors often receive frantic phone calls from clients and accountants about unexpected items reflected on the W2 forms. Often times this is because fringe benefits were not reported throughout the year in the payroll system.
As 2016 is quickly coming to a close, make sure your payroll department is fully aware of any items that may not be included in your normal payroll file, but must be reported on each employees’ W2 form. Some common examples include:
Health premiums for 2% S-Corp owners
The total health premium remitted should be included in the W2 earnings for a 2% S-Corp owner. Your payroll department will often include the employee contributions, but you should verify that you correctly identify the S-Corp owners to properly tax the payroll deduction for health premiums as well. In addition, the employer’s portion of the premium is required for inclusion on the W2.
Personal use of company car
If you provide your employees with a company vehicle, you will need to calculate the value of the personal use of the car to be reported as taxable compensation. Your accountant can help you determine the amount to add to each applicable employee’s W2.
Group Term Life (GTL) insurance
If you offer GTL Insurance in excess of $50,000 to your employees, the amount of the premium for coverage in excess of $50,000 is taxable to the employee. The IRS outlines the calculation to determine the taxable portion of GTL in their Publication 15-B.
Contributions to a Health Savings Account (HSA)
If you sponsor a High Deductible Health Plan, your employees may have setup an HSA. You must include any employer and employee contributions made through a Section 125 (cafeteria) plan to the HSA. Some companies contribute directly to the HSA provider which may cause this to be missed on the W2.
Cash bonuses or gift cards
If you provide cash bonuses or gift cards to employees, the IRS wants those amounts included as taxable compensation on the employee’s W2. The IRS is very clear that there is no minimum when determining tax implications of cash and cash equivalents. These gifts are also subject to any employer payroll taxes.
Stock plans and stock options
Multiple rules govern stock and stock options. Work with your accountant to determine what amounts are subject to payroll taxes for inclusion on the W2 form.
Properly reporting all benefits on your employees’ W2 forms can be complex.
A Chicago area Professional Employer Organization (PEO) that assists hundreds of small and mid-sized businesses with payroll processing and payroll tax processes. Tandem HR also helps clients save time and money while growing their business by taking on the administrative tasks associated with human resources, payroll processing, and tax administration, benefits, regulatory compliance and risk management.
If your business needs assistance in the W2 preparation process or with any other payroll related matters, call 630.928.0510 or fill out the form below and one of our Business Development Managers will contact you.