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reporting taxable income upon discrimination test failure


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Guest ANITAO
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I have a client who has a Premium Only Section 125 plan, and at plan year end it is determined that they have failed the 25% concentration test for benefits to Key employees. The benefits to key employees are now considered taxable income.Does anyone know how is this reported?,i.e. 1099, w-2, etc? Also, is the employer liable for any other related taxes, such a FICA, FUTA, etc? Any comments, or cites would be appreciated.

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