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For all of 2020, I was retired and had no salary/wages.
However I received a W-2 from my ex-employer for taxable cost of Group Term Life over $50,000 (Box 12 Code C).

The only entries on the W2 are in Box 1, 12 and 13.
Box 1 $200
Box 12 C-$200
Box 13 - Retirement Plan is checked.

No Federal, SS or Medicare Tax were withheld. Also SS and medicare wages are zero.

I have distributions from a traditional pension plan (1099-R) and also investment income (1099-Int, Div).
There is no withholding from any of these sources and I pay estimated income tax.

I will be using Turbo Tax and hopefully it will handle my situation.
But I still like to understand each form that I get and its implications.

My questions are:
1. Do I owe any SS or Medicare Tax on the $200 imputed GTL compensation and if so how do I pay it?
Also will there be penalties for late payment of SS tax?
2. Should my ex-employer have withheld SS or Medicare Tax?

Thanks for your expertise and assistance.
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No. of Recommendations: 1
1.) Any unpaid SS or Medicare Tax due will be added to your total federal tax due. No special handling is required to pay it.

No special penalties. Underwithholding penalty might apply but with only $200 in imputed income, it is unlikely to trigger underwithholding penalties.

2.) There was only imputed income which means there wasn't any paid income for your ex-employer to use for withholding.

With boxes for Medicare and Social Security being blank, Turbo Tax will probably whine but should handle it.
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No. of Recommendations: 5
Adding to vkg's reply, and only for 2020 taxes, there is another wrinkle that you need to watch out for.

Employers were allowed to defer social security withholdings for part of 2020, so the usual calculation of 6.2% of social security wages won't apply to everyone. While this doesn't affect you directly, how TT implements this (does it default to the typical answer? require a manual input of SS withholding? etc.) could impact its calculations of the amount of SS tax it shows you owe.

You need to carefully check the completed return to ensure that the reported SS and Medicare tax added to your return are correct. You may need to play with the data inputs to get the correct output.

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No. of Recommendations: 3
In the past I have used TT and currently H&R Block at Home. Both have the user enter the W2 fields as stated on their W2 form. It would be unrealistic to expect every employer would have calculated Social Security and Medicare withholding correctly.

<rant> Deferring Social Security withholding set a loaded trap for the unwary and/or careless. </rant>
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Let's continue the follow up to previous responses.

Box 12 should have two additional codes in it, M and N.

M is the uncollected Social Security tax on the GTL. N is the uncollected Medicare.

I'm fairly sure that if you input those codes and the amounts associated with them, along with the rest of the info from your W2, Turbo Tax will have no problem handling your situation. It's not that unusual - I see a handful of similar W2s every year.

In the off chance your W2 does not have codes M and N in box 12, I'd contact your former employer. A corrected W2 may be in the works.

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My W2 does not have Codes M and N in box 12. Just the code C as I mentioned in my post.

I haven’t started my taxes yet. Waiting to receive all my 1099s. Hopefully TurboTax will handle it.

Thank you all for your responses.

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I contacted my ex-employer and they insisted the form is correct.

I further found out that FICA taxes from self employed are owed only if the year's compensation is greater than $400, so I am OK for this year.

I then played around with TurboTax and increased the compensation to greater than $400, and it does calculate the FICA tax on Schedule SE.

Thanks again for all those who posted replies.

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I'm sorry, but I disagree with your employer. You are not self-employed. If you were, the payment would have been reported on 1099-NEC (or 1099-MISC if this wasn't considered earned compensation). It was reported on a W-2 which means you are an employee and owe FICA and Medicare tax on reported "wages". The $400 threshold doesn't apply to employees.

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