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We are looking at paying bonuses and have a question. In order to calculate total compensation (to determine the 10% cap on profit sharing bonuses), the regulation states to total 1)All wages and tips reportable for Medicare tax purposes in box 5 on IRS form W-2, 2) contributions that are made to designated tax advantaged plans that are defined contribution plans, and 3)The profit sharing bonus itself (even though it is paid in a different year). My question is what about a section 125 Cafeteria plan. This compensation is not reported in box 5 of the w2. Can it be added for the total compensation amount? Or is this considered a “designated tax advantaged plan” that would be added in step 2 of the calculation? I can’t find anything in the regulation or comments that address this issue. Thanks for any input!
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