What Is ‘Cafe 125’ on a W2 Tax Form? Zacks

However, your life insurance premiums on coverage over $50,000 are subject to Social Security and Medicare taxes, but not federal income tax. Boxes 1, 3 and 5 of your W-2 respectively stand for your federal, Social Security and Medicare taxable wages. Your cafeteria plan premiums aren’t included in the taxable wages of those boxes if they aren’t subject to the tax. Apply caution when stating taxable wages on the W-2, because each cafeteria plan benefit has its own tax implication.

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What Pre-tax Deductions are Not Subject to Federal Tax?

The amounts for these programs, covered under Section 125 of the IRS code, are reflected https://adprun.net/ in Box 14, IRC125. They are not subject to federal, Social Security, and Medicare taxes.

For example, if you earn ​$50,000 a year​, but you receive ​$4,000 per year​ in cafeteria benefits, you are only paying taxes on ​$46,000 annually​. If you have a Section 125 dependent care plan, your employer must report any amounts it and you paid toward your account in Box 10. As of 2013, dependent care benefits of up to $5,000 are nontaxable; if you’re married filing a separate tax return, your limit is $2,500.

Careers

For instance, group-term life insurance premiums on coverage that exceed ​$50,000​ aren’t pre-tax even when offered within a cafeteria plan. In this case, include premiums for coverage over ​$50,000​ in your employees’ taxable wages. Also, while pre-tax 401 contributions are exempt from federal income tax, they are subject to Social Security and Medicare taxes. In this case, exclude 401 contributions from your employees’ federal wages in box 1 and include them in Social Security and Medicare wages, respectively, in boxes 3 and 5. This amount includes total wages and other compensation paid during the calendar year.

The following guide is intended to answer the most frequently asked questions regarding the content and distribution of your W-2, which is needed to file your income tax returns. Contributions to your tax-deferred annuity could be affected by LoDI benefits. If there is a discrepancy in your W-2 statement due to LoDI, contact your agency and request that a W-2 Correction Request form be submitted to OPA. If a City vehicle is assigned to you and you use it for driving to and from home, you are required to pay taxes on the value of the use of the vehicle. The amount is determined by mileage or a flat rate and is reported by your agency to OPA. For administrative help regarding the new Form W-4, please contact the human resources/payroll office at your agency.

b – Employer identification

For a complete understanding of the rules, see the Proposed Regulations under Code section 125. Note that Archer Medical Savings Accounts are not eligible for Cafe 125 plans. These MSAs were created to help the self-employed and small businesses with medical care costs. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

The Valentine’s Day Heart Assorted Chocolate Gift is the perfect box of chocolates for showing someone special how much you care. The IRS defines a New York City employee as belonging to a pension plan if the employee is eligible to join a plan regardless of whether the employee joins the plan. If you are eligible to join a pension plan, Box 13 on your W-2 is checked.