My W2 has an entry in Box 14 The description on W2 says S125. What do I put as a description from the drop down list?

What if I have less other calf 125 $2158 but I also have in Box 12a DD $2117.14? From what I’ve read this seems redundant, like differents amounts of money referring to the same thing. I know next to nothing on the issue so your input would be greatly appreciated. You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.

Section 125 plans enable employees to allocate a portion of their salary toward eligible expenses like health insurance premiums or flexible spending accounts (FSAs) before taxes are applied. These contributions lower gross income, thereby reducing taxable wages and overall tax liability. Employers report these amounts in Box 14 to inform employees of the deductions from their wages for these benefits.

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Your W-2 reflects these deductions and benefits at the end of the tax year, providing you with a summary of what you’ve earned and the taxes withheld. Take note of the connection between benefit selection timing and your W-2 as it helps you make informed choices that shape your tax situation for the upcoming year. You’ll choose “Cafe 125” benefits during your initial enrollment period or during designated open enrollment periods, typically held annually by your employer.

The deductions are already factored into your taxable income as shown on your W-2 form. C- Taxable costs of group life insurance over 50,000 included in W2 boxes 1,3( upto Social Security wages base and Box 5. Is there a place on tax forms to put this amount or is it already configured in the employer’s W-2? Pre-tax deductions within “Cafe 125” on a W-2 form are like secret agents working behind the scenes to benefit you.

The benefits  are paid for pre-tax dollars, which means you aren’t taxed on them at the federal level. ​Box 14​ of your W-2 serves as an informational tool for the employee. Your employer may break down the amounts you contributed to your Section 125 plan, or it may list w2 other cafe 125 the amount as one payment. For example, if you have only a health insurance plan, ​box 14​ may show one amount for medical, dental and vision. This is because all of those deductions are excluded from federal income tax, Social Security tax, and typically state and local income tax.

• That designation refers to amounts on which you don’t have to pay income taxes, and potentially payroll taxes, because you chose to receive a specific employee benefit rather than cash.
• Check with your employer to see if there have been any changes to your benefits plan or how it impacts your taxable income.
• When you allocate a portion of your earnings to these benefits pre-tax, you effectively reduce your taxable income, potentially lowering the amount of tax you owe.
• The beauty of these choices is the flexibility, letting you craft a compensation package that aligns with your unique circumstances.
• These distinctions help you to make informed decisions about your compensation package.

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While the “S125” code itself does not directly alter tax calculations, it serves as a reminder to factor in these pre-tax contributions during tax and financial planning. These cafeteria plans allow employees to set aside pre-tax income for certain employer-offered benefits. Benefits provided by plans covered under section 125 include adoption and dependent care assistance, health insurance, 401k and group term life insurance policies. They are called cafeteria plans because employees are given a list of benefits to choose from, similar to a cafeteria-style menu. Premium Conversion Plans, also known as Premium Only Plans (POP), allow employees to pay their portion of health insurance premiums with pre-tax dollars.

• On the up side, because the cafeteria plan funds are not part of the employee’s salary, the IRS does not consider this money as a wage.
• Certain discount offers may not be valid for mobile in-app purchases and may be available only for a limited period of time.
• These contributions reduce taxable income, resulting in tax savings.
• Income allotted to cafeteria plans is taken directly from an employee’s paycheck before taxes are taken out.
• Pre-tax deductions within “Cafe 125” on a W-2 form are like secret agents working behind the scenes to benefit you.

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I have read your last paragraph three times and still don’t understand it…it’s been a long tax season. For state wages in Box 16, I have a similar calculation as I’ve expressed before in a different column ‘xxx State, Wages, Tips etc, but the ‘other cafe’ is marked as N/A in there. RD | CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..

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The “S125” entry indicates amounts related to these pre-tax benefits. Cafe 125 refers to IRS regulation code section 125, which governs cafeteria employee benefit plans. Think of it like building your meal at a cafeteria, but instead of food, you’re selecting from a buffet of benefits like health insurance, life insurance and dependent care assistance. You pay for these benefits with pre-tax dollars, potentially saving you a bundle on taxes. For example, education assistance and certain transportation benefits aren’t included. A Section 125 ‘cafeteria’ plan is so-called because you get to choose your benefits from a menu, like choosing food at a cafeteria.

Your employer’s cafeteria plan offers you this assortment so you can tailor your benefits to your needs. This might mean deciding between different health insurance plans, opting for a certain amount to go into your retirement fund, or even setting aside pre-tax dollars for dependent care. Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you can not deduct them as medical expenses. Income allotted to cafeteria plans is taken directly from an employee’s paycheck before taxes are taken out. These pre-tax contributions can save the employee hundreds—possibly even thousands—of dollars in income taxes and Social Security and Medicare taxes over the course of a year.

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The term “Cafe 125” is short for “cafeteria plan,” and the tax code section that authorizes the favorable tax terms. Under Cafe 125, adoption benefits provided by employers are exempt from federal income tax withholding. However, these benefits, except the forfeited ones from a cafeteria plan, are still subject to social security, Medicare and railroad retirement taxes.

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If you’re close to a tax bracket threshold, Cafeteria 125 contributions could potentially move you into a lower tax bracket. To correct such errors, you’ll need to contact your employer and request a corrected W-2 form (W-2c). This corrected version will reflect the accurate pre-tax deductions and taxable wages, ensuring your taxes are calculated correctly. This can help you ensure you’re not over-contributing or under-utilizing your benefits. Many employers offer online portals or regular statements that allow you to monitor your contributions and usage. By staying informed, you can make adjustments if necessary during open enrollment periods or when experiencing qualifying life events.

However, while the plan may offer many benefits, ​box 14​ of your W-2 shows only the benefits that apply to you. When you receive your W-2 form at the end of the year to document your taxable income, you might notice “Cafe 125” with an amount next to it on your form. That designation refers to amounts on which you don’t have to pay income taxes, and potentially payroll taxes, because you chose to receive a specific employee benefit rather than cash.

Note that Archer Medical Savings Accounts (MSAs) are not eligible for Cafe 125 plans. These MSAs were created to help the self-employed and small businesses with medical care costs. If it is an employee benefit that has already been removed from Wages in Box 1, then, choose a category of Other. The beauty of these choices is the flexibility, letting you craft a compensation package that aligns with your unique circumstances. Being aware of and understanding these options empowers you to make strategic decisions about your overall benefits package. Generally, you cannot change your Cafeteria 125 elections based solely on seeing the amount on your W-2.

If an employee accidentally contributes over this limit, the plan retains its status if certain conditions are met, like uniform application of terms and correction of excess contributions. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media. A Code S125 refers to a Section 125 plan which describes payroll deductions for an employee benefit.

Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. For comprehensive tax, legal or financial advice, always contact a qualified professional in your area. S’witty Kiwi assumes no liability for actions taken in reliance upon the information contained herein.

For example, group life insurance premiums above ​$50,000​ don’t trigger federal income taxes, but deductions are taken out for Medicare and Social Security. If you receive benefits above that amount, the difference is taxed as wages and you will see it included in ​boxes 1, 3 and 5​. If you’ve noticed Cafe 125 on your W-2 tax form, you might be curious about its meaning and how it affects your taxes. Cafe 125 refers to the Cafeteria Plan under Section 125 of the IRS tax code. These plans allow employers to offer a range of pre-tax benefits, such as health insurance, dependent care assistance, and flexible spending accounts (FSAs). These cafeteria plans allow employees to set aside pre-tax income for certain benefits, including dependent care assistance, group term life insurance, and adoption assistance.

For example, if you own more than ​two percent​ shares in an S-Corp company, you will not be able to partake in the plan for tax exemptions. Just like charitable donations need to be made to qualified organizations, so do you have limitations within cafeteria plan rules in order to get tax exemptions. As mentioned before, reimbursement for continuing education does not qualify as well as scholarships.