Guest bhoskinson Posted January 4, 2002 Report Share Posted January 4, 2002 Has anyone ever needed to adjust an employee's W2 based upon the eligible expenses under the Section 125 plan for dependent care? What are the IRS issues for this? THANKS! Link to comment Share on other sites More sharing options...
Carol V. Calhoun Posted March 1, 2002 Report Share Posted March 1, 2002 Why would you need to adjust W-2 income for this? If the employee set aside a specific amount for dependent care under a properly constructed cafeteria plan, that amount is excluded from W-2 income. If the employee then fails to have enough expenses to use up that money, he or she will lose the money, so this situation would not require an amendment of the W-2. Was there some kind of error in reporting this initially? Employee benefits legal resource site The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances. Link to comment Share on other sites More sharing options...
Guest bhoskinson Posted March 4, 2002 Report Share Posted March 4, 2002 We were instructed to issue a W2-C for those employees which returned a statement (showing proof of payment) and W10 from their daycare provider when the amount differs from the deduction. Are we not responsible for adjusting these? :confused: Link to comment Share on other sites More sharing options...
Sandra Pearce Posted March 5, 2002 Report Share Posted March 5, 2002 I've been involved (human resources and payroll) with several 125 plans and have never seen any adjustment made to W-2s. There is a block on the W-2 that shows the dollars taken from the employee for the dependent care account. Link to comment Share on other sites More sharing options...
Carol V. Calhoun Posted March 5, 2002 Report Share Posted March 5, 2002 In all the cases I've seen, the employer either pays the daycare provider directly, or reimburses the employee only for documented expenses. Thus, there is no adjustment necessary, because reimbursed expenses are always equal to documented expenses. The deduction from the employee's paycheck should not be adjusted, even if actual expenses are less than anticipated. Employee benefits legal resource site The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances. Link to comment Share on other sites More sharing options...
Guest bhoskinson Posted March 6, 2002 Report Share Posted March 6, 2002 Thanks for the info!!!! I really appreciate this message board! Link to comment Share on other sites More sharing options...
Guest bhoskinson Posted March 6, 2002 Report Share Posted March 6, 2002 I have been researching this a bit further and found that our dependent care account is not set-up as a reimbursable account. Our third party "125 administrator" sends the deducted pre-tax amounts directly to the employee (without the employee submitting a receipt or statement from the daycare provider) and it is the employees responsibility to submit this payment to the daycare provider. With type of setup, wouldn't the pre-tax monies given to the employee which are not supported with a statement or daycare receipt from their provider be considered taxable income and need added to their W2 wages? Isn't the employer responsible for adjusting the gross wages? Have you heard of a dependent care 125 account estabilished in this manner? Any assistance would be appreciated! Link to comment Share on other sites More sharing options...
Sandra Pearce Posted March 6, 2002 Report Share Posted March 6, 2002 I'm no authority, but I've never heard of a third party administrator reimbursing for expenses without proper documentation. Your SPD should address how claims are filed/reimbursed. Link to comment Share on other sites More sharing options...
Carol V. Calhoun Posted March 7, 2002 Report Share Posted March 7, 2002 If the third-party administrator is paying claims without adequate documentation, you run the risk of the entire arrangement being treated as a nonaccountable expense reimbursement arrangement. In that case, all of the amounts paid to employees, not just those that exceeded their actual expenses, would be includible on their Forms W-2. Employee benefits legal resource site The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances. Link to comment Share on other sites More sharing options...
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