2007 W2 Social Security Wages $87,000

[jasdlm]

Client has standard W2 from employer. (Employer is a small publishing company; perhaps 15 employees. S-Corp.) The W2 has $93,736.64 in Box 2 Wages and the same number in box 5 Wages. Box 3 has $87,000 listed in social security wages. There is nothing in box 12, box 14, or any other box on the W2 (other than state information).

1) Could there be some reason I'm not aware of why this would actually be correct?

2) Assuming it's not correct, what do I do now? Obviously, the Employer has underpaid and the Employee has under withheld. (Yes, Box 4 is calculated on the $87,000.)

Please advise. Thanks so much. I've never come across this kind of situation with a W2.

[JohnH]

The limit in 2003 was $87.000.

Maybe either the bookkeeper or the tax software is out of date (or both).

I'd point it out to the client but then move on with preparing the return.

[jasdlm]

Okay . . . now I'm really sweating. Just looked back and Client's 2006 Wage maximum shows as $87,000. Clients Box 1 income was $89,000. I just flat out missed it. Besides eating a bunch of penalties and interest for not catching this, what do I do next?

To make myself feel better, it appears that possibly none of the preparers for the other 14 employees caught it, because the mistake was made in 2 years in a row. I'm scared to look, but it probably goes back to 2003.

Yikes. I guess I'll go pull the 2005 W2 so I can really not sleep tonight.

[JohnH]

Maybe I'm missing something here.

How would you eat any penalties for not catching this?

(Unless you're the bookeeper/accountant for the employer)

[jainen]

>>I can really not sleep tonight<<

Tonight is Easter, when we celebrate the victory of forgiveness.

Hey, what do you know about how the compensation was structured? Some things are not taxable but still get hit up for SS, and some are taxable but escape SS. All you care about is the income tax. You should of course alert the client to the possible error in his SS record, and it is nothing more than a possibility at this point. Any shortfall must be made up by the employer, not the income tax preparer.

You can sleep in peace (of which we also celebrate the victory).

[jasdlm]

Thank you, gentlemen. I am not the bookkeeper/accountant for the company. The company has a large accounting firm in Kansas City that does its books.

I just drove down to my office to pull the client's W2's back to 2003. 2006 was the first year client crossed the SS maximum.

I will do as you suggest: prepare the return with the W2 as printed, point out the possible error to my client, and move on to another return.

I feel like an idiot for not catching last year's possible 'mismatch' on this client's W2, but I'll forgive myself and work harder to not miss things.

Thank you both for taking time to respond. I think now I will be able to wind down and get some sleep.

Happy Easter to both of you.

[jklcpa]

Yep, don't sweat something like that. There are many more technical issues that we probably all have to resolve in the next couple of weeks.

Have a good night.

[Pacun]

Good suggestions. Also, other employees might not be affected by this if they made less than $87K from this employer or made more than $89K from all employers including any Sch SE in 2006.

Of course medicare doesn't have a ceiling.

[BulldogTom]

The company has a large accounting firm in Kansas City that does its books.

Isn't that the HQ for HRB? Sounds like their strategies to save tax. Good People they got.

Sorry, could not resist the opportunity to take a jab at HRB.

Tom

Lodi, CA