SERPs and taxes

[Alan]

Since retiring in 2010 I have been receiving a standard pension from my ex-employer in the USA reported on a 1099-R plus a SERP.
https://www.investopedia.com/terms/s/serp.asp

Through 2019 the SERP has been reported on a W-2 in which the gross payment was recorded in box 1 as per regular W-2s, but boxes 3 and 5 were blank so no FICA or Medicare taxes. At the end of 2019 I received a letter from my employer saying that as per IRS code 3101 that ongoing my non-qualified pension (SERP) would now be subject to FICA. Fair enough I thought, I’ve had a 10 year run and the FICA payments will increase by SS and lower the WEP when I start to take it, due to my UK pensions as I only had 23 years of SS payments when I retired.

I received my W-2 this year and now box 1 is blank and boxes 3 and 5 have the gross payments so I have had no income tax withholding but have paid FICA and Medicare. Importing this into TurboTax now means I am paying no taxes on this and that can’t be right. I’ve asked payroll to look into this and their response was that this was what ADP have done on receipt of the new instructions from the IRS and they will ask ADP to investigate further. That was 2 weeks ago and no response back from ADP yet.

At the end of the day I don’t actually pay US taxes on this as I take a foreign tax credit on the UK tax I pay to reduce it to zero anyway. Has anyone ever come across a W-2 with no taxable income or any idea why ADP would have done this due to IRS code 3101?

 

[latexman]

Very strange, I've never seen that.

I have Retiree Company-Paid Life Insurance and my W-2 has taxable income. The same value is in boxes 1, 3, 5, and 12a, which is coded C.

Is your 12a Coded or blank?

 

[Alan]

Very strange, I've never seen that.

I have Retiree Company-Paid Life Insurance and my W-2 has taxable income. The same value is in boxes 1, 3, 5, and 12a, which is coded C.

Is your 12a Coded or blank?

12a is blank, and was blank in previous years.

11 “Nonqualified plans” holds the gross amount, as it has done in previous years.

 

[cathy63]

No idea if the W-2 is correct, but just FYI -- you will not be able to e-file a return that has a W-2 with nothing or $0 in box 1. If you want to e-file and run into problems, the work-around is to put $1 in box 1.

 

[Alan]

No idea if the W-2 is correct, but just FYI -- you will not be able to e-file a return that has a W-2 with nothing or $0 in box 1. If you want to e-file and run into problems, the work-around is to put $1 in box 1.

Thanks. I’d rather not file a return with a W-2 that is different to the one sent into the IRS if I can avoid it but my main concern is that the income is not taxed, and there have also been no withholdings.

 

[SecondCor521]

Another way to work around the e-file situation is to put $1 in Other income (Schedule 1 line 8) with the description "In order to e-file". This way, your W-2 would match (which I agree with you is a good idea).

Understand that your bigger issue is the correctness of the W-2 itself and the fairness of taxation without income on the SERP, but I don't know anything about that, sorry. Chasing it down between the former employer and ADP sounds like the right course of action, albeit a painful and slow one.

 

[latexman]

Sorry, I got nothing, but am interested.