SECURE 2.0 May Impact How Businesses Complete Forms W-2

The IRS has released a fact sheet informing employers that adopting certain plan provisions will impact how certain amounts are reported on Form W-2, Wage and Tax Statement. The fact sheet notes that provisions potentially affecting Forms W-2 include the following.

• De minimis financial incentives (Section 113 of the SECURE 2.0 Act)
• Roth Savings Incentive Match Plan for Employees (SIMPLE) and Roth Simplified Employee Pension (SEP) Individual Retirement Arrangements (IRAs) (Section 601 of the SECURE 2.0 Act)
• Optional treatment of employer nonelective or matching contributions as Roth contributions (Section 604 of the SECURE 2.0 Act)

If an employer offers a de minimis financial incentive under SECURE 2.0, IRS notes it is considered part of the employee's income and is subject to regular tax withholding unless there's a specific exemption and refers readers to Notice 2024-2 for additional details.

Salary reduction contributions to a Roth SEP or Roth SIMPLE IRA generally will be included in boxes 1, 3, and 5 of Form W-2. They’ll also be reported in box 12 with code F (for a SEP) or code S (for a SIMPLE IRA).

Conversely, employer matching and nonelective contributions to a Roth SEP or Roth SIMPLE IRA as well as designated Roth nonelective and matching contributions to a qualified plan must be reported on Form 1099-R for the year in which the contributions are made. The total amounts are listed in boxes 1 and 2a of Form 1099-R, and Roth SEP or SIMPLE employer contributions will be reported with a code 2 or 7 in box 7, and the IRA/SEP/SIMPLE checkbox is checked. Designated Roth employer contributions in a qualified plan will be reported with a code “G” in box 7. Additional details can be found in IRS Notice 2024-2.