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    #1

    OK what does it mean?

    Retired friend calls just got his W-2 from his old employer he retired from a couple of years ago. He knew he was going to get, but the surprise was included in Box 1 was about $5,900 charge for his group term insurance (that the previous year was $1,900) and new this year in Box 12 - M = excess social security tax on group term life insurance premiums.

    How does this happen in year two of retirement and not year 1. Does the M amount mean the group term in box 1 does not get added as earned income??? If it does he started drawing social security early and thought he calculated that everything was OK until the additional of $4,000 for group term showed up as taxable and FICA wages...

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    #2
    Well, it's like this. Life insurance premiums are recalculated many times when a person overtakes a certain age. Or maybe the imputed value per IRS is recalculated when a person exceeds a certain age, e.g. goes from 59 to 60; or maybe 64 to 65.
    ChEAr$,
    Harlan Lunsford, EA n LA

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      #3
      Sorry I'm Dense but

      why is a retired person in year two of retirement getting a W-2? I can see that if he retired during a year for that year he would receive a W-2 and possibly a retirement distribution or two but after year one it seems like all he would get is retirement distributions.

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        #4
        Compensation

        Part of his compensation package must've included life insurance to continue even after he retired.

        I had a retired NY Telephone employee who received free telephone service. So, after retirement, he received a Form 1099-R for his pension and a W-2 with the value of his telephone service in box 1 and, I think, codes M and N for him to pay the SS and Medicare that could not be withheld once he no longer had paychecks.

        See if he received a letter when he separated from service that describes his retirement benefits.

        Comment

          #5
          TY Lion

          I suspected there was a sensible answer here and I thought it might help me to know what it is in case at some point I have a similarly situated client.

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            #6
            Originally posted by erchess View Post
            why is a retired person in year two of retirement getting a W-2? I can see that if he retired during a year for that year he would receive a W-2 and possibly a retirement distribution or two but after year one it seems like all he would get is retirement distributions.
            The value of the life insurance which is still provided to the retiree is treated as taxable wages. When he was working it was in Box 1, and shown in Box 12, Code C if it exceeded fringe benefit limits. Now that he is retired, it is shown in Box 1, 3 & 5, but since he is not actually receiving any money, there is nothing to withhold the SS/MC from. So you will report those cost amts shown on the W-2 and it will be added to his income tax liability -- in my software it shows as an addition to Line 72 of 1040 with the notation "UT." This is for Uncollected [SS/MC] Tax. (not excess SS tax).
            PS: Since it goes on Line 7 as wages, it qualifies for IRA deduction if he is not otherwise eliminated, and may reduce taxable SS.
            Last edited by Burke; 02-02-2011, 04:18 PM.

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              #7
              Whoo

              It is reported as an M = excess social security or RRTA on life insurance. My question is if there is M = which is a credit on the individual return = is there any chance that their is some portion of the Box 1 amount that should not be FICA wages. I do not think so, but was wondering... Thanks guys...

              Comment

                #8
                Originally posted by JON View Post
                It is reported as an M = excess social security or RRTA on life insurance. My question is if there is M = which is a credit on the individual return = is there any chance that their is some portion of the Box 1 amount that should not be FICA wages. I do not think so, but was wondering... Thanks guys...
                Code M is unpaid social security, not excess social security. It is not a credit, it's additional taxes due. It is reported on line 60 as "UT". Most software handles this correctly.

                In addition to the imputed life insurance benefits which are explicitly mentioned in the instructions, GM retirees may show this sort of thing due to their prepaid legal plan "benefit".
                Last edited by DonPriebe; 02-03-2011, 06:14 AM. Reason: Wrong line number

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                  #9
                  Don

                  you are so right. I think I was confusing a lot of things. My main question was is it earned income and obviously it is, I was hoping for an exception. The other question is how we go from $1900 to whatever in one year. I was wondering if somehow the previous year he was considered an employee still and 2010 as a non employee his chargeback is for the total, not just over 50,000. Thanks for the help

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