W-2 Box 13 Retirement

A large payroll company (10,000+ payroll clients) marked box 13 with an X for a 401(k) participant who made no elective deferrals to the plan nor receved an employer contribution for 2019.  There is no DB plan.  So the employee received no employee or employer contribution into the plan account in 2019 nor was there any employer accrued contribution 2019.  The employee was planning to do a deductible max IRA.  the employer specifially told them - no X for this person.  The Payroll company said because there were 401(k) loan payments they had to mark Box 13 with an X.  That has to be wrong in my opinion.  I gave them the IRS instructions on this with examples of no employee nor employer contribution but it doesn't say anything about loan payments - probably didn't think it needed to!  Comments?

54 minutes ago, Tom said:

A large payroll company (10,000+ payroll clients) marked box 13 with an X for a 401(k) participant who made no elective deferrals to the plan nor receved an employer contribution for 2019.  There is no DB plan.  So the employee received no employee or employer contribution into the plan account in 2019 nor was there any employer accrued contribution 2019.  The employee was planning to do a deductible max IRA.  the employer specifially told them - no X for this person.  The Payroll company said because there were 401(k) loan payments they had to mark Box 13 with an X.  That has to be wrong in my opinion.  I gave them the IRS instructions on this with examples of no employee nor employer contribution but it doesn't say anything about loan payments - probably didn't think it needed to!  Comments?

They are wrong.

15 hours ago, Larry Starr said:

They are wrong.

Agreed.  The easiest course of action is to go ahead and make the IRA contribution, take the deduction, keep the documentation that there were no 2019 contributions, and respond to the inevitable IRS correspondence.  It sucks that a payroll company's incompetence results in that but unless the client is ready and willing to stand up to them and threaten to fire them, you are banging your head against a wall.

One caveat - they could be right for the wrong reason.  If there were profit sharing contributions "for" 2018 that were not known about until 2019, with no deposits in 2018 for 2018, then it would be appropriate to check the box for 2019.

7 hours ago, Bird said:

Agreed.  The easiest course of action is to go ahead and make the IRA contribution, take the deduction, keep the documentation that there were no 2019 contributions, and respond to the inevitable IRS correspondence.  It sucks that a payroll company's incompetence results in that but unless the client is ready and willing to stand up to them and threaten to fire them, you are banging your head against a wall.

One caveat - they could be right for the wrong reason.  If there were profit sharing contributions "for" 2018 that were not known about until 2019, with no deposits in 2018 for 2018, then it would be appropriate to check the box for 2019.

Also, since we are talking about 2019 W-2s issue in 2020, the employer could just issue a corrected W-2.