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Deferred Compensation

Forum|Forum|6 years ago
March 18, 2020
4 replies
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Is deferred comp subject to FICA tax? My client received a 1099 with his deferred comp of $108,000 in box 7. Federal and state income taxes were withheld, but I'm not sure where to report the income and if it is subject to FICA

Windows 10

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Best answer by Laura49

Compensation is to be reported on a W2 in Box 1 and 11 plus box 16 for state wages. The 1099 is the incorrect form for reporting Deferred Comp. I myself receive Deferred Comp and have never received a 1099. Ask your client for the agreement with his former employer to make sure it truly is Deferred Comp.

Just-Lisa-Now-

Intuit Community Champion

I had someone in yesterday with 3 Deferred Comp W2's, none of them had SS or Mdcr withheld, I dont think the 1099MISC Box 7 is the proper form to report that.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

G

gats1016Author

Level 3

I didn't think so either, but he was on the Board of Directors. I asked to see his documents on his Company's Deferred Comp Plan. We will see if he can "find" them. Thanks for your help

L

Laura49Answer

Level 3

Compensation is to be reported on a W2 in Box 1 and 11 plus box 16 for state wages. The 1099 is the incorrect form for reporting Deferred Comp. I myself receive Deferred Comp and have never received a 1099. Ask your client for the agreement with his former employer to make sure it truly is Deferred Comp.

C

Carol65

Level 3

Laura49

I'm wondering if you can help me. I have always input compensation as you described with no problem. This year I am receiving this diagnostic -

Form W-2 #1: Contains amounts for (11) Nonqualified plans or Wages earned while
incarcerated. These amounts are reported on the Schedule 1 and are not included in
the wage amount reported on Form 1040. This return will be rejected and must be
filed on paper. The IRS is reviewing the applicable business rule and will be
addressing this issue in the future.

Are you having this problem too? Do you have any advice?

Thanks for your time.

E

Eaglelion

Level 2

I received same message - clearly not someone incarcerated; in fact, I don't even know where you would input someone is in fact incarcerated. My guess is this is a bust and some programming bug. Hopefully Lacerte is made aware of this. I'll have to sit on this return for a week or two and perhaps Lacerte will read their own diagnostic and figure out it makes zero sense.

BobKamman

Level 15

I understand the question as referring to a 1099R. It's a distribution from a retirement plan, contributions to which were subject to FICA taxes unless the employer was exempt. Occasionally I see a W-2 for deferred compensation from a nonqualified plan -- those were mostly set up for higher-level executives, and not subject to Section 401 rules.

Just-Lisa-Now-

Intuit Community Champion

@BobKamman wrote:

I understand the question as referring to a 1099R. It's a distribution from a retirement plan, contributions to which were subject to FICA taxes unless the employer was exempt. Occasionally I see a W-2 for deferred compensation from a nonqualified plan -- those were mostly set up for higher-level executives, and not subject to Section 401 rules.

Ahhh, ok. Anytime I see someone ask about a 1099 with Box 7 and FICA, I assume its a 1099MISC

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

BobKamman

Level 15

It might have been a 1099-MISC; I just noticed the Box 7 reference. According to one source, this would be the correct way of reporting distributions to a company director. Also, a beneficiary of a deceased employee. I think the former would be subject to SE tax, but not the latter.

https://www.stevenslee.com/tax-reporting-for-nonqualified-deferred-compensation-plans/

L

Laura49

Level 3

If it is a true Deferred Comp plan then there are no FICA taxes required. You need to get the actual Deferred Comp agreement and read it. That is an important step.

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