Reporting certain deferrals of compensation
A table in the core form Part VII instructions indicates that employee deferrals to 401(k) and 403(b) plans should be reported in other reportable compensation on Schedule J. Because these are deferrals of base pay for many organizations, the base pay column amount in Schedule J may be understated. Is it incorrect if an organization reports base pay at the full amount, including these deferrals, rather than separating the deferrals from other base pay and reporting the deferrals in Schedule J as other reportable compensation?
The sum of amounts reported by the organization for an individual in Schedule J columns (B)(i) – (iii) must equal the total reportable compensation included in box 1 or box 5 (whichever is greater) of Form W-2 or box 7 of Form 1099-MISC for that person. The organization may report a 401(k) or 403(b) employee deferral either in column (B)(i) as base pay, or in column (B)(iii) as other reportable compensation. For instance, if an employee has Box 5 compensation of $200,000, including $5,000 of 401(k) employee deferrals, the organization may report $200,000 in base pay (column (B)(i)), or $195,000 in base pay and $5,000 in other reportable compensation (column (B)(iii)).
TIP: Certain pre-tax deductions from compensation not included in Box 5 raise reporting issues not expressly addressed by the instructions. These include pre-tax deductions for certain health insurance premiums not included in Box 5. For example, an employee with base pay of $200,000 before a pre-tax deduction of $5,000 for health insurance premiums might have $195,000 reported in Box 5 of the Form W-2. The organization should report $195,000 in column (B)(i) and $5,000 in column (D).