Discussion:401(K) Limits and W-2 Reporting

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Revision as of 11:17, 24 December 2006
Mtmckeecpa (Talk | contribs)
(RDP, Elective d)
← Previous diff		 Revision as of 13:20, 24 December 2006
Scot1 (Talk | contribs)
(Yes, just gross)
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Not quite sure I understand about the reimburse part...husband is asking wife to reimburse business for the FICA taxes....a lump of coal in his stocking!}} Not quite sure I understand about the reimburse part...husband is asking wife to reimburse business for the FICA taxes....a lump of coal in his stocking!}}
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 +{{ForumReplyPost|UserID=Scot1|Date=24 December 2006|Text=Yes, just gross up her pay for FICA as indicated - no need for reimbursement, non-deductible, etc.}}

Revision as of 13:20, 24 December 2006

Discussion Forum Index --> Tax Questions --> 401(K) Limits and W-2 Reporting

RDPcpa (talk|edits) said:

24 December 2006
Since this worked out so well the last time, I thought I'd try it again.

I have a client who runs an S-corp and has about 10 emloyees including his wife. The owner and wife are over 50 and contribute the maximum allowed to the S-corp's 401(k) plan. The wife has an annual salary of $18000 and contributed all of it as an elective deferral this year, something she has not done previously. Can the wife "reimburse" the corporation for FICA taxes, or can the company eat it up as an expense. If it would be a company expense, then would it be nondeductible? Or would the FICA taxes be treated as "salary" and would need to increase the W-2 by $1491 to cover the $1322 FICA tax on $18000 and the FICA tax on the $1322 as deemed salary.

Thanks for the help.

Mtmckeecpa (talk|edits) said:

24 December 2006
RDP,

Elective deferrals are subject to FICA. To get an $18k deduction, her salary would need to be $19,491

She ends up with a net paycheck of zero...$18k to the 401k and 1491 withheld for FICA, plus the company match on the FICA.

Not quite sure I understand about the reimburse part...husband is asking wife to reimburse business for the FICA taxes....a lump of coal in his stocking!

Scot1 (talk|edits) said:

24 December 2006
Yes, just gross up her pay for FICA as indicated - no need for reimbursement, non-deductible, etc.
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