Excludable compensation due to injury at work

[ILLMAS]

How does one report excludable compensation in ATX?  

Thanks

[Lee B]

Are you asking about Workers Compensation wage benefits, short term disability benefits or something else?

[BulldogTom]

What form was the compensation reported to the IRS on?

Tom
Sparks, NV

[ILLMAS]

Per letter received to be attached to tax return:

The amount identified below as EXCLUDABLE COMPENSATION is in lieu of workmans compensation and is excludable from income as per IRS Technical Advice Memorandum TR 32-153-91.

The form then shows the gross amount of W-2 wages he received while injured, which is included in box 1 of the W-2; it then shows the amount that should be deducted as excludable.

[Lee B]

Weird, did he receive one W 2 with this information or did he receive an additional W 2 with this information?

Was social security and medicare withheld?

An quick online search didn't find this memoramdum.

Other online commentators say that a corrected W 2 needs to be issued and that the employer is just being lazy.

[ILLMAS]

Please see link for an exact copy of the letter (not my clients):  https://dqjghx1vau0u.cloudfront.net/uploads/assets/30690/original.pdf?1454507714

[Lee B]

Very interesting, since  several commentators specifically refer to the City of Chicago of having a history doing this exact thing.

Well, they won't issue a corrected W 2, so you will have to be creative

[BulldogTom]

We are well past the statute of limitations on this return.   Why are you looking at this?

Assuming I got this from a client in the current year, I would probably recalc the W2 for correct box 1, 3 & 5 amounts, enter the W2 I just calculated into ATX with the corrected box marked in the W2 entry screen, and e-file that sucker with the letter attached.   At audit I would argue that the letter constitutes a correction to the W2.   It gives me something to stand on to justify the way I filed the return. 

Going any other way means adding adjustments with statements to multiple lines of the return.   Without a correct W2, there is no way they are going to refund the excess SS and medicare withheld.   By correcting the W2, that is the only item affected and only one item to fight with the IRS about.    

JMHO

Tom
Sparks, NV

[ILLMAS]

47 minutes ago, BulldogTom said:

We are well past the statute of limitations on this return.   Why are you looking at this?

Assuming I got this from a client in the current year, I would probably recalc the W2 for correct box 1, 3 & 5 amounts, enter the W2 I just calculated into ATX with the corrected box marked in the W2 entry screen, and e-file that sucker with the letter attached.   At audit I would argue that the letter constitutes a correction to the W2.   It gives me something to stand on to justify the way I filed the return. 

Going any other way means adding adjustments with statements to multiple lines of the return.   Without a correct W2, there is no way they are going to refund the excess SS and medicare withheld.   By correcting the W2, that is the only item affected and only one item to fight with the IRS about.    

JMHO

Tom
Sparks, NV

That was just a sample letter I found online, however it's the exact letter my client received for 2020, since it's considered a government job there is no social security but there is Medicare, and the excludable amount is being taxed for for Medicare.  

I will be around your area next week, taking a brief vacation to Vegas.

[BulldogTom]

27 minutes ago, ILLMAS said:

I will be around your area next week, taking a brief vacation to Vegas.

Vegas to Reno is quite a ways.   Over 400 miles.   I will wave to you when you get here, but the mountains may obstruct your view. ;0)

Enjoy sin city.   I will be there in Sept for the NATP tax seminar.   It is one of the few live seminars going this year.

Tom
Sparks, NV