Section 125 On W 2

The benefits received by an employee exceed 5 000.

Section 125 on w 2. These benefits may be. 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. The only important box 14 sec 125 irc 125 dropdown is if you work for the government of new york city.

This doesn t apply to section 125 contributions. Section 125 of the internal revenue code refers to cafeteria plan benefits. The plan is called a cafeteria plan because it includes a menu of benefits for employees to choose from.

Sec 125 represents the pretax health insurance costs you paid. This may sound like it has something to do with where you go on your lunch break but there is a more reasonable explanation. It is also known as a cafeteria plan.

The taxable wages boxes on your annual w 2 form show only your wages from which taxes were deducted. If you re enrolled in your employer s section 125 benefit plan your premiums are deducted from your wages on a pretax basis which gives you a tax break. Cafe 125 stands for irs regulation code section 125 regarding tax free cafeteria plans.

How is this benefit reported on form w 2. Some payroll services will put this on box 14. An employee can generally exclude from gross income up to 5 000 of benefits received under a dependent care assistance program each year.

The amount has already reduced your w2 box 1 wages so you don t deduct it again on your federal return. Section 125 plans are available to all employees as well as their spouses and dependents. Boxes 1 3 and 5 should include 200 the amount in excess of the nontaxable assistance and applicable taxes should be withheld on that amount.