CPM W-2, 1099 & Year-End Reporting 3 — Questions and Answers
Question 1: An employee participates in a 401(k) plan with $10,000 in elective deferrals. How are these deferrals reflected on the W-2?
- Excluded from all boxes on the W-2
- Reported in Box 12 with code D and excluded from Box 1 but included in Boxes 3 and 5 (Correct answer)
- Included in Box 1 and excluded from Boxes 3 and 5
- Reported in Box 14 only
Correct answer: Reported in Box 12 with code D and excluded from Box 1 but included in Boxes 3 and 5
Traditional 401(k) deferrals are reported in Box 12 with code D, reduce federal wages in Box 1, but remain subject to Social Security and Medicare taxes in Boxes 3 and 5.
Question 2: Which 1099 form replaced Form 1099-MISC Box 7 for reporting non-employee compensation starting in tax year 2020?
- 1099-NEC (Correct answer)
- 1099-K
- 1099-G
- 1099-R
Correct answer: 1099-NEC
The IRS reintroduced Form 1099-NEC in 2020 specifically to report non-employee compensation, moving it out of 1099-MISC Box 7.
Question 3: An employee's health insurance premiums are paid through a Section 125 cafeteria plan. How does this affect W-2 reporting?
- The premiums are added to Box 1 as taxable wages
- The premiums reduce Box 1, Box 3, and Box 5 wages (Correct answer)
- The premiums reduce Box 1 wages only, not FICA wages
- The premiums are reported in Box 12 with code DD only for employer contributions
Correct answer: The premiums reduce Box 1, Box 3, and Box 5 wages
Section 125 cafeteria plan premiums are excluded from federal, Social Security, and Medicare wages, reducing Box 1, Box 3, and Box 5.
Question 4: What is the accelerated filing deadline for W-2 Copy A when an employer has 250 or more W-2 forms to file electronically?
- January 31 (Correct answer)
- February 15
- February 28
- March 31
Correct answer: January 31
Both electronic and paper filers must submit W-2 Copy A to the SSA by January 31, regardless of the number of forms.
Question 5: A 1099-R is issued to report distributions from which type of account?
- Health savings accounts
- Pensions, annuities, retirement plans, or IRAs (Correct answer)
- Dependent care flexible spending accounts
- Non-employee compensation
Correct answer: Pensions, annuities, retirement plans, or IRAs
Form 1099-R reports distributions from pensions, annuities, retirement plans, profit-sharing plans, IRAs, and insurance contracts.
Question 6: Which W-2 box code is used to report employer-sponsored health coverage costs under the ACA reporting requirement?
- Code W
- Code DD (Correct answer)
- Code FF
- Code AA
Correct answer: Code DD
Box 12, code DD reports the cost of employer-sponsored health coverage, which is required for informational purposes under the Affordable Care Act.
Question 7: An independent contractor performs $800 of services but also purchases $200 in goods from the payer. What amount appears on the 1099-NEC?
- $1,000 — both services and goods
- $800 — services only (Correct answer)
- $200 — goods only
- $0 — below the $1,000 threshold
Correct answer: $800 — services only
Only payments for services are reportable on Form 1099-NEC; payments for goods or merchandise are excluded from 1099-NEC reporting.
CPM W-2, 1099 & Year-End Reporting 3
An employee participates in a 401(k) plan with $10,000 in elective deferrals.
How are these deferrals reflected on the W-2?