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So if an employee is part of a Long Term Incentive Plan, and they are now terminating after 20 years, they are eligible to receive their payments from the LTIP for the next 5 years, based on the plan.   The question is reporting it - my understanding is that the Current Present Value of the total amount being paid over 5 years is to be reported on the this years W2 as an employee but for FICA purposes only as it has not been paid yet.  I've heard this was done to benefit the EE as well as the company for FICA purposes, because the HCE has probably met the SS Maximum for the current year, so truly it's only reported for Medicare purposes.   I also know that the total amount being added to Medicare earnings for this year must be reported under Box 12 Code Y for this current year.

My question, over the next 5 years, the terminated EE will receive a payment from the LTIP, which is to be reported on a W2 for Federal Income Tax purposes only.  What entry is necessary to reflected on Box 12?

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Actually, Box 12 Code Y is not required until the income inclusion regulations are finalized.  The PV of benefit is included in Boxes 3 and 5 in the year FICA is being assessed, and Box 1 (and probably Box 11) in the years of distribution.

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