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Leevena, I'm curious as to why you think the employer can't recover this amount. This is a dependent care FSA, not a health FSA, so there's no uniform coverage rule. Check the terms of the plan, but usually a dependent care FSA says it will only reimburse expenses to the extent that there's funding in the account (i.e., amounts withheld from participant's pay minus prior reimbursements). I would treat this the same as any other unpaid indebtedness from an employee to the employer, e.g., if the employer had overpaid the employee in a particular pay period. I think getting the employee's consent is crucial since it may be required under state wage withholding rules. Always best to check with legal counsel familiar with state wage and hour laws before withholding amounts from employees' pay.

Two or three years ago we had a client receive a penalty notice from the IRS for the same issue, failure to submit the W2's for a given year. It was discovered that the corporate controller did in fact forget to make the submission. The client's CPA firm worked with the IRS regarding the issue. The W2's were submitted and the IRS waived the penalty.

We are modifying our procedures as ours are subject to the safe harbor hardship rules. I am sure it was an oversight and hope that the IRS will clarify that a casualty loss for purposes of determining whether a participant has experienced an “immediate and heavy financial need” should not be affected by HR 1’s changes to the definition of casualty loss.

Anybody in this business and especially dealing with the issues of Who's The Employer (and with PEOs that is a BIG question) needs to own a subscription to Who's The Employer Here is the link: http://www.employerbook.com/ This is written by our own Derrin Watson and, full disclosure, I had a hand in the original drafts and marketing when Derrin was one of my partners in the fabled PIX (Pension Information Exchange) at the early days of the internet.

I like that. though I was hoping you would have said let's go back to the glorious old days of vesting 100% after 10 years service and let the person go after 9 years since he is 0% vested.

The employee has additional income BECAUSE his share of the premium was NOT taken out of his paycheck! Now, there are all kinds of legal issues here. Best is to get an agreement with the employee to have some sort of arrangement over the new year to recover the excess payment, but if the employee does not voluntarily agree, there may be substantial legal barriers to the employer trying to recover the money without the state law of impermissible garnishments applying. This is a question for a labor lawyer who knows the particular state laws.

I don't think you're going to get the custodian to file an amended anything, even assuming your analysis of facts and application of law are impeccable. Have you even got them to the point of not reporting the current fair market value as a taxable distribution in 2018? Assuming there was a PT in 2011 and that it involved the IRA owner (which IRS could kick the tires on if the assets are greatly appreciated so that LTCG reduced rate of tax outweighs the tax deferral), then you're proposed handling is consistent with our experience and thinking. Note that one thing to weigh in the analysis re whether to delay dealing with this and thus potentially have even 6-year statute run, in addition to the potential ethical and related issues (on which I take absolutely no position here), is the duty of consistency. We know that if the 6-year statute did run, the IRS would take the position that IRA owner had zero basis in distributed assets, and that case law would support IRS on this. If you waited beyond 6 years and zero basis, would you have a start date for your CG holding period? Just a question. Assuming you do file an amended return for 2011 and pay ordinary tax on then value, would seem like IRS could not challenge the basis or 6-year holding period. But there is no case exactly on point to best of my knowledge.

I'm pretty sure I wrote that Q&A answer in 2005 (I was head of the Q&A process). Those were our (my) interpretations and the IRS agreed with them. That's not so say someone else at some other time at some other part of the IRS would have a different opinion, but I stand by those answers. So, a couple of things.... If you are "interpreting" it and trying to use "precedent", I think you are in error. Either an employment relationship is continuing on 12/31 or it is not. If someone is terminated as of 12/30, they are not employed on the last day of the year; period. We have this discussion with clients all the time and it is the client's call to determine what the termination date is. I should point out there are other issues at play: worker's compensation; unemployment benefits, health & welfare benefits, etc. This is NOT a facts and circumstances issue; it is a factual issue and the employer makes the determination. I disagree with my good and old friend Tom on the issue of the strict Christian. Whether he ever worked on Sunday or not, if Sunday is the last day of the year and he QUIT on Saturday, he is not employer on the last day of the year. If he turns in his resignation and says he quits as of 12/31 and the employer doesn't countermand that, then he IS employed on the last day of the year. This is ALWAYS an employer determination, and the question to ask is always: "is there still an employment relationship on 12/31 or has it ended prior to 12/31". Simple question (but I acknowledge not always a simple answer because many clients don't think about it when someone quits on 12/30). On the other hand, my wife and I got MARRIED on 12/30 (many MANY years ago), so we know how important the difference is between the last day of the year and NOT the last day of the year! :-)

If a plan uses 3401(a) for the def of comp, then that excludes group term life correct? The plan does not use w-2 def of comp, which would include it under 6052. They also do not exclude fringe.