Catherine Posted February 23, 2011 Report Posted February 23, 2011 Hi folks -- I'm brain-dead today; started with a small headache that got MUCH bigger after a long conference call with the IRS on an outstanding matter, so when it came to this little question I'm flummoxed. Client (self-employed) issued W-2's to employees and now wants to know if they did it right on one of them. Has a SIMPLE plan and some employees defer, matches for all, yadda yadda. Client hired under-18 child to do some work (real work, qualifies as work, not subject to FICA, not a heck of a lot of money for the year; under $1K). Child decided to defer ALL pay to SIMPLE (why not as parent was gifting the money to do just that). W-2 shows $0 in box 1, 3, 5, and the total deferred amount in Box 12. Is that right? Or does the total go in Box 1 as well as Box 12? Put the client off saying I'd double check and get back later. Tried to think it through myself and have managed to think myself in circles. TIA, Catherine Quote
Margaret CPA in OH Posted February 23, 2011 Report Posted February 23, 2011 Off the top of my head, anything in Box 1 is reportable, taxable wages. With all deferred to SIMPLE, Box 1 should be 0 so I think it is correct even if it looks weird. Quote
rfassett Posted February 23, 2011 Report Posted February 23, 2011 Yep - if all income was deferred, box 1 is zero. And boxes 3 and 5 are zero due to the under-18 rule. Here in PA, you would see the total earnings subject to State and Local tax. "Flummoxed" - its not contagious, is it? Quote
Gail in Virginia Posted February 23, 2011 Report Posted February 23, 2011 Margaret is correct. Ordinarily, you would have amounts in box 3 and 5 for social security and medicare wages when the entire salary is deferred. However, since this was a minor child of a self-employed individual, there is nothing in those boxes either. Your client got it right, IMO. Quote
Catherine Posted February 23, 2011 Author Report Posted February 23, 2011 Margaret is correct. Ordinarily, you would have amounts in box 3 and 5 for social security and medicare wages when the entire salary is deferred. However, since this was a minor child of a self-employed individual, there is nothing in those boxes either. Your client got it right, IMO. Thank you all, very much!! And no, "flummoxed" is not contagious. That would be "flux" (as in old name for intestinal distress, not the soldering supply). Catherine Quote
grandmabee Posted February 23, 2011 Report Posted February 23, 2011 does the plan have an age limit? I have a client and his plan has age limit must be 21 or over Quote
Catherine Posted February 25, 2011 Author Report Posted February 25, 2011 does the plan have an age limit? I have a client and his plan has age limit must be 21 or over No age limit; client set it up that way so that the kids could participate if they worked. Thanks for the reminder, though! Quote
kcjenkins Posted February 26, 2011 Report Posted February 26, 2011 Smart parents. Just hope the kids know the penalties if they decide to pull it out early, once they move out on their own. Quote
Catherine Posted February 26, 2011 Author Report Posted February 26, 2011 Smart parents. Just hope the kids know the penalties if they decide to pull it out early, once they move out on their own. I believe the parents told the kids that the money was untouchable until retirement. That ought to stick until they're old enough and mature enough to look into it on their own -- by which time they may be mature enough to not touch! Quote
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.