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Group Term Life Insurance
If you paid for group term life insurance in excess of $50,000 for an employee or a former employee, you must report the amount determined by using the table in Pub. 15-A in Boxes 1, 3, and 5 of Form W-2. Also, show the amount in Box 12 with code C. Use the Edit/Prepare W2’s tab selection to report this amount in Box 12.
For active employees, you must withhold Social Security and Medicare taxes.
Former employees must pay the employee part of the Social Security and Medicare taxes on premiums for group-term life insurance over $50,000 on Form 1040. You are not required to collect those taxes. However, you must report the uncollected Social Security tax with code M and the uncollected Medicare tax with code N in box 12 of Form W-2. Use the Edit/Prepare W2’s tab to report this amount in Box 12.
To Deal with the Above Issue
If you have not processed your last payroll:
Enter a payroll adjustment (CADJ) with no check number and no check date with the required Social Security and Medicare amounts to be withheld on the employee's last paycheck in the year. While this will take care of the Social Security/Medicare issue, you still need to adjust gross pay to reflect the addition to total wages. Enter a payroll adjustment (PADJ) with a check number of 0, the December date of the payroll checks the adjustment will be included with and a check the PADJ box. This amount will be added to the YTD and QTD figures. The payroll GJ will need to be modified to not debit payroll (997000-50000) and credit cash for this recognized amount.
If you have already processed your last payroll:
You may not have withheld enough Social Security or Medicare. According to Circular E, Section 13 Adjustments, paragraph titled Collecting under withheld taxes from employees, "If you withheld no income, Social Security, or Medicare taxes or less than the right amount from an employee's wages, you could make it up from later pay to that employee. But you are the one who owes the underpayment to the IRS. Reimbursement is up to you and the employee. Under withheld income tax must be recovered from the employee on or before the last day of the calendar year.
A Payroll Adjustment (PADJ) will need to be entered. On the Payroll Adjustment screen, select the employee number, enter 0 for the check number and the date of 12/31/xx. The PADJ box will automatically be checked. Enter the amounts of the calculated amounts, in the appropriate boxes. Prepare payroll with just the PADJ and no timesheet batch. After reviewing the payroll register, go to Print checks. A message will appear stating there are no checks and ask if you would like to save the check run, answer Yes. Use the Edit/Prepare W2s tab to enter box 12 information.
This must be done before the Save/Clear step on the Annual menu is done. If this step HAS been done, click on the Edit/Prepare W2 tab, select the employee and edit the information into the W2.
