As year-end approaches, it is time to make sure not only are wages reported on an employee’s IRS Form W-2 but also certain fringe benefits. You should make sure that the following are properly included in Forms W-2 if applicable:
- Greater than 2% S corporation shareholder-employees must include the health and accident premiums paid on their behalf by the corporation in their wages. This amount is not subject to Social Security, Medicare, or Unemployment taxes.
- For any employee/owner that is allowed to drive a company owned automobile for personal use, the value of that personal use should be included in the employee’s wages. Commuting is typically considered personal use so it is rare for an employee not to have income associated with the benefit of driving a company owned vehicle. The value of this benefit to be included in wages is calculated based on the annual lease value table published by the IRS and the personal usage percentage. The IRS requires contemporaneous records to support the business versus personal usage and an annual mileage log for each vehicle is required. This benefit is subject to all payroll taxes.
- The cost of group term life insurance for amounts in excess of $50,000 of life insurance must be included in wages based on the IRS uniform premium cost tables. This benefit is also subject to all payroll taxes.
- If you filed 250 or more Forms W-2 in 2012, you are required to report the total cost (employee + employer share) of health care coverage on your 2013 Forms W-2. If you filed less than 250 Forms W-2 in 2012, the reporting for 2013 is optional. This amount is not included in wages and is not subject to any payroll taxes but is included on the form for informational purposes only.
- If you are filing greater than 250 Forms W-2, they must be transmitted to the IRS electronically.
Each payroll vendor may have different timelines for accumulating these items. Missing the deadline can cause an increased fee to properly include or create the need for corrected Forms W-2 to be issued. Please contact Nicole Eshnaur or your MarksNelson advisor if you have any questions or need any assistance with your Form W-2 reporting.