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sec. 125 deduction correction

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chuckker

Junior Member
What is the name of your state (only U.S. law)? Florida

How do you correct pre tax sec. 125 deductions that were not made for plan years 2007, 2008 and 2009 that the plan discovered should have been made but were not. Therefore, in 2010, the participant agrees to make up the missed deductions with post tax payments. Does the employer issue W-2 C's for years 2007, 2008 & 2009 for the missed deduction in the Sec. 125 plan.

Thanks,
Chuck Steiner
 


pattytx

Senior Member
No correction necessary if employee will pay arrears with a personal check. A 125 plan is a "salary reduction" plan; no salary reduced, no tax-preferred status. The employer COULD however take extra deductions from current pay until the arrears is paid and that would retain the tax-preferred status. Otherwise, a real mess for payroll.

I'm not even going to get into why neither the employee nor the employer caught this three-YEAR error.
 

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