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Late Taxes

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Late Taxes

Late taxes Publication 957 - Main Content Table of Contents 1. Late taxes What is Back Pay?Reporting Back Pay Back Pay Under a Statute Nonstatutory Back Pay Format for Report to the SSA Questions 2. Late taxes Special Wage PaymentsReporting Special Wage Payments Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments Nonqualified Deferred Compensation and Section 457 Plans Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) PlansSpecial rule for box 11 of Form W-2 (distributions and deferral in the same year). Late taxes 1. Late taxes What is Back Pay? Back pay is pay received in a tax year(s) for actual or deemed employment in an earlier tax year(s). Late taxes For social security coverage and benefit purposes, all back pay, whether or not under a statute, is wages if it is payment for covered employment. Late taxes Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. Late taxes Report all back pay. Late taxes However, the tax year(s) for which back pay is credited as wages for social security purposes is different if it is awarded under a statute. Late taxes See Back Pay Under a Statute , later, for more information. Late taxes Reporting Back Pay The Internal Revenue Service (IRS) and the SSA consider back pay awards to be wages. Late taxes However, for income tax purposes, the IRS treats all back pay as wages in the year paid. Late taxes Employers should use Form W-2, Wage and Tax Statement, or electronic wage reports to report back pay as wages in the year they actually pay the employee. Late taxes The SSA no longer accepts reports on tapes, cartridges, and diskettes. Late taxes Example. Late taxes In 2012, Terry Morris earned wages of $50,000. Late taxes In the same year, she received $100,000 in settlement of a back pay case against her employer that covered the periods January 2007 through December 2011. Late taxes Her employer properly reflected social security wages of $110,100 and Medicare wages of $150,000 on her 2012 Form W-2. Late taxes However, if an employer did not include back pay wages on a previously filed Form W-2, magnetic media, or electronically filed wage report, the employer should prepare a wage correction report, Form W-2c, Corrected Wage and Tax Statement, or electronically filed report, to add the back pay award to the wages previously reported. Late taxes Example. Late taxes If, in the above example, Terry Morris' employer had prepared her 2012 Form W-2 reporting social security and Medicare wages of only $50,000 each, the employer would have to correct that report. Late taxes A Form W-2c correcting the 2012 Form W-2 would show previously reported social security and Medicare wages of $50,000 and the correct amount of $110,100 for social security wages and $150,000 for Medicare wages. Late taxes SSA treatment of back pay under a statute. Late taxes   Under the law, the SSA credits back pay awarded under a statute to an individual's earnings record in the period(s) the wages should have been paid. Late taxes This is important because wages not credited to the proper year may result in lower social security benefits or failure to meet the requirements for benefits. Late taxes   However, back pay under statute payments will remain posted to the employee's social security earnings record in the year reported on Form W-2 (or Form W-2c) unless the employer or employee notifies the SSA (in a separate, special report) of the back pay under a statute payment. Late taxes Then, the SSA can allocate the statutory back pay to the appropriate periods. Late taxes   If a back pay award is not made under a statute, the SSA credits back pay as wages in the year paid. Late taxes    If employers do notify the SSA of this payment, they should prepare a special report (with the information noted below) and send it to: Social Security Administration Attn: CPS Back Pay Staff 7-B-15 SWT 1500 Woodlawn Drive Baltimore, MD 21241-0001 Be sure to send this special report to the above address because the SSA handles it separately from other reports. Late taxes    If you paid the back pay award in the same tax year to which it applies, report the wages on that year's Form W-2. Late taxes No further action is necessary. Late taxes Example. Late taxes In 2012, Judy Wilson received a salary of $30,000 and a back pay under statute award of $2,000 for the period January through June 2012. Late taxes Her employer properly reported wages of $32,000 for social security and Medicare on her 2012 Form W-2. Late taxes No further action is necessary. Late taxes Information the SSA needs to properly credit back pay under a statute (special report). Late taxes   After you complete the special report, you or the employee should send it to the SSA when or after you submit the Form W-2 (on paper or electronically) to the SSA for the year you pay the statutory back pay to the employee. Late taxes There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. Late taxes The special report must include the following information. Late taxes The employer's name, address, and employer identification number (EIN). Late taxes A signed statement citing the federal or state statute under which the payment was made. Late taxes If the statute is not identified, the SSA will assume the payment was not under a statute and will not allocate to earlier period(s). Late taxes The name and telephone number of a person to contact. Late taxes The SSA may have additional questions concerning the back pay case or the individual employee's information. Late taxes A list of employees receiving the payment and the following information for each employee: The tax year you paid and reported the back pay. Late taxes The employee's social security number (SSN). Late taxes The employee's name (as shown on his or her social security card). Late taxes The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. Late taxes The period(s) the back pay award covers (beginning and ending dates—month and year). Late taxes The other wages paid subject to social security and/or Medicare taxes and reported in the same year as the back pay award (if none, show zero)*. Late taxes Do not include the back pay award shown in that wage report. Late taxes If you originally submitted the report under an establishment number, show that number and the amount of money that is to remain under that establishment number. Late taxes The amount to allocate to each reporting period*. Late taxes This includes any amount you want allocated (if applicable) to the tax year of the award payment. Late taxes If you do not give the SSA specific amounts to allocate, the SSA does the allocation by dividing the back pay award by the number of months or years covered by the award. Late taxes *Note. Late taxes   For periods before January 1, 1978 (before January 1, 1981, for state and local government employers covered by a Section 218 agreement), show the wage amounts for each calendar quarter ending March 31, June 30, September 30, and December 31. Late taxes For all tax years, show and identify the social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) separately. Late taxes MQGE is applicable to federal employees beginning in 1983, and for certain state and local government employees beginning in 1986. Late taxes For tax years 1991 and later, list the social security and Medicare wages separately. Late taxes If you originally reported the individual's wages under an establishment or payroll record unit number, show the amount of wages to remain in the award year for that number and furnish that number to the SSA along with the EIN. Late taxes Back Pay Under a Statute Back pay awarded under a statute is a payment by an employer following an award, determination, or agreement approved or sanctioned by a court or government agency responsible for enforcing a federal or state statute that protects an employee's right to employment or wages. Late taxes Examples of pertinent statutes include: Age Discrimination in Employment Act, Americans with Disabilities Act, Equal Pay Act, Fair Labor Standards Act, National Labor Relations Act, State minimum wage laws, and State statutes that protect rights to employment and wages. Late taxes Payments based on laws that have a similar effect to those listed above also may qualify as payments made under a statute. Late taxes Back pay awards, under some of the statutes listed above, may be compensation for personal injury and not pay for employment. Late taxes Such awards are not wages for social security coverage purposes. Late taxes If a court-approved or sanctioned settlement agreement states that the agreement is not an admission of discrimination, liability, or act of wrongdoing, the statement does not change the nature of a back pay award. Late taxes The payments made in such a settlement may still be back pay and wages under the rules discussed here. Late taxes Nonstatutory Back Pay A payment for back wages negotiated between an employer and employee without an award, determination, or agreement approved or sanctioned by a court or government agency, the payment is not made under a statute. Late taxes Delayed wage payments and retroactive pay increases resulting from union negotiation or payments under local ordinances or regulations are back pay and are wages. Late taxes However, they are not payments made under a statute. Late taxes If you are uncertain whether the back pay award was under a qualified statute, you may need to contact your personnel department or legal counsel or the attorney who filed the suit. Late taxes Format for Report to the SSA Use the format shown in Table 1, later, to send the SSA the information needed to properly credit back pay under a statute. Late taxes In a cover letter, include: Name and address of the employer, Statute under which you paid the back pay, Name and telephone number of the employer contact, and Signature of the reporting official. Late taxes Under certain circumstances, back pay may be a special wage payment and excluded from wages counted under the social security earnings test. Late taxes If you pay back pay to an employee age 61 or older, report it to the SSA in accordance with this section. Late taxes Read Special Wage Payments, later, for additional reporting instructions. Late taxes Questions If you have questions concerning back pay under a statute, call the SSA at 1-800-772-6270. Late taxes Exception. Late taxes   If you are a state or local government employer who was covered by an agreement under Section 218 of the Social Security Act before January 1, 1987, and you paid a back pay award before January 1, 1987, which you did not report to the SSA, contact your state Social Security Administrator's office. Late taxes Table 1. Late taxes Format for Report (Under Covering Letter) to Request SSA to Allocate Back Pay Under Statute Wages Employer's EIN: xx-xxxxxxx Tax Year in Which Award Payment Was Paid: 2012 (1) SSN and Employee Name (2)1 Award Amount and Period(s) (3)2,3 Other Soc. Late taxes Sec. Late taxes /Med. Late taxes Wages Paid In Award Year (4)3 Allocation     Soc. Late taxes Sec. Late taxes Med. Late taxes /MQGE Year Soc. Late taxes Sec. Late taxes Med. Late taxes /MQGE xxx-xx-xxxx HELEN T. Late taxes SMITH $100,000 1/2009 - 12/2012 $40,000 $40,000 2009 2010 2011 2012 $20,000 25,000 27,000 28,000 $20,000 25,000 27,000 28,000 xxx-xx-xxxx SAM W. Late taxes EVANS 30,000 7/89-12/91 -0- -0- 1989 1990 1991   6,000 12,000 12,000 xxx-xx-xxxx ROLAND S. Late taxes ADAMS 15,000 7/80-12/81 -0- -0- 9/80 12/80 1981 3,500 3,500 8,000   1Exclude amounts specifically designated as damages, penalties, etc. Late taxes  2Exclude the amount of back pay, if any, included in that amount. Late taxes  3For periods before January 1, 1978 (and for state and local government (Section 218) employers before January 1, 1981), show the wage amounts by calendar quarters. Late taxes The social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) must be shown separately FOR ALL YEARS. Late taxes (Wages subject ONLY to MQGE would be shown in the Medicare/MQGE column; no wages would be shown in the Soc. Late taxes Sec. Late taxes column. Late taxes ) For tax years 1991 and later, the social security and Medicare wages must be listed separately. Late taxes Explanation of examples. Late taxes Helen T. Late taxes Smith–The back pay award, excluding interest, was $100,000 for the periods 1/2009-12/2012. Late taxes In 2012, this employee was also paid $40,000 in other wages. Late taxes (Her Form W-2 for 2012 reported $110,100 for social security and $140,000 for Medicare. Late taxes The SSA allocation will result in adjusted posted wages of $68,000 for social security and $68,000 for Medicare for 2012. Late taxes ) Sam W. Late taxes Evans–The back pay award was $30,000 for the periods 7/89-12/91. Late taxes This employee was hired in 1989 and was subject to MQGE only. Late taxes He was no longer employed by this governmental employer in 2012. Late taxes (His Form W-2 for 2012 reported $30,000 for social security and $30,000 for Medicare. Late taxes After the SSA allocation, he will not have any net posted wages for 2012. Late taxes ) Roland S. Late taxes Adams–The back pay award was $15,000 for the periods 7/80-12/81. Late taxes He was no longer employed by this state and local government (Section 218) employer in 2012. Late taxes (His Form W-2 for 2012 reported $15,000 for social security and $15,000 for Medicare; after the SSA allocation, he will not have any net posted wages for 2012. Late taxes ) If the state Social Security Administrator's office needs more information, they can contact the SSA at the following address:   Social Security Administration Office of Income Security Programs Office of Earnings and Program Integrity Policy 6401 Security Boulevard 2506 OPS Baltimore, MD 21235 2. Late taxes Special Wage Payments A special wage payment (SWP) is an amount paid by an employer to an employee (or former employee) for services performed in a prior year. Late taxes Employers should report to the SSA special wage payments made to employees and former employees who are recipients of social security retirement benefits. Late taxes Special wage payments made to a retired employee receiving social security or to an employee who continues to work while receiving social security benefits may reduce the benefits the individual receives if not reported to the SSA. Late taxes Special wage payments may include (but are not limited to): Accumulated sick and vacation pay, Back pay, Bonuses, Deferred compensation, Payments because of retirement, Sales commissions, Severance pay, and Stock options. Late taxes Note. Late taxes Payments made after retirement that are part of the normal payroll cycle should not be routinely reported as special wage payments. Late taxes Earnings Test. Late taxes   Benefits paid to a social security beneficiary under full retirement age may be reduced if the beneficiary continues to work. Late taxes The SSA uses the information in boxes 1, 3, and 5 of Form W-2 to determine the beneficiary's current year earnings. Late taxes Special wage payments, which are for services performed in a prior year, will increase the current year earnings on Form W-2, which also may result in a reduction in the beneficiary's benefits. Late taxes If a benefit is reduced because of a special wage payment, the beneficiary must get documentation from the employer before the SSA can restore the deducted portion. Late taxes Therefore, employer reports of special wage payments help prevent incorrect benefit reductions. Late taxes Reporting Special Wage Payments Employers must report special wage payments for income tax purposes and social security and Medicare taxes in the year received. Late taxes Report income, social security, and/or Medicare taxes for special wage payments on Form W-2. Late taxes See Nonqualified Deferred Compensation and Section 457 Plans, later, for reporting nonqualified deferred compensation plan deferrals and payments on Form W-2. Late taxes In addition, report to the SSA special wage payments made during the reporting year to retired employees and employees who continue to work while receiving social security benefits. Late taxes Submit reports after the close of the tax year. Late taxes To avoid delays in processing, submit reports in time to reach the SSA by April 1. Late taxes Use one of the following reporting methods. Late taxes Electronic reporting. Late taxes   Special wage payment files can be sent electronically by logging onto Business Services Online (BSO) via the socialsecurity. Late taxes gov website. Late taxes BSO enables organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration. Late taxes You must register to use this website. Late taxes The web address is www. Late taxes socialsecurity. Late taxes gov/bso/bsowelcome. Late taxes htm. Late taxes   Use the specifications and record layout shown in  Table 2, later. Late taxes Only one file at a time may be submitted. Late taxes If your file is large (>10MB), or you have a slow internet connection, the transmission will be faster if the file is zipped. Late taxes A zipped file contains a file that has been compressed to reduce its file size. Late taxes WinZip and PKZIP are examples of acceptable compression packages. Late taxes   Electronic submissions not meeting the specifications in Table 2 will be rejected. Late taxes Paper listing. Late taxes   A paper listing can be used to report special wage payments to several employees. Late taxes Use the format shown in Table 3, later. Late taxes Submit paper listings to the local SSA office nearest your place of business. Late taxes Visit www. Late taxes socialsecurity. Late taxes gov/locator to find a Social Security office near you. Late taxes Form SSA-131. Late taxes   Use Form SSA-131 to report special wage payments made to an employee. Late taxes Also use this form to report nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in box 11 of Form W-2. Late taxes    This image is too large to be displayed in the current screen. Late taxes Please click the link to view the image. Late taxes Publication 957 Reporting Back Pay to the Social Security Administration Instructions for Form SSA–131   EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. Late taxes Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. Late taxes 2. Late taxes Enter the date the employee retired. Late taxes Enter “Not Retired” if the employee has not retired. Late taxes 3. Late taxes Enter the date that the employee last performed services; was not expected to return to work; and was not subject to recall to render additional services. Late taxes This date should be the same as or earlier than the date in item “2”. Late taxes Enter “Not Retired” if the employee has not retired. Late taxes 4. Late taxes Enter the wages that were paid to the employee in the tax year that were for services that were performed in years prior to the tax year or that were paid on account of retirement. Late taxes  Examples (not all inclusive) of payments to be included: Payments in lieu of vacation that were earned in a year prior to the tax year. Late taxes Accumulated sick payments which were paid in a lump sum based on “retirement” as the sole condition of payment. Late taxes Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year. Late taxes Payments “on account of retirement”–dismissal, severance or termination pay paid because of retirement. Late taxes Bonuses which are paid pursuant to a prior contract, agreement or promise causing the employee to expect such payments regularly; or announced to induce the employee to work more steadily, rapidly or efficiently or to remain with the employer. Late taxes Stock Options. Late taxes   Do not include in item “4” payments: For annual, sick, holiday, or vacation pay if used (absence from work) prior to the date of retirement (earlier of items “2” or “3”). Late taxes That were reported or will be reported under “Nonqualified Plans” on the Form W-2. Late taxes That were deducted from the employee's wages and paid to a deferred compensation plan (e. Late taxes g. Late taxes , 401k). Late taxes Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages). Late taxes Bonuses earned and paid in the tax year. Late taxes 5. Late taxes Check whether payments listed in item 4 will be made for years after the tax year. Late taxes If yes, please show the amounts and years in which these will be paid, if known. Late taxes 6. Late taxes Nonqualified deferred compensation and section 457 plans only. Late taxes If you were unable to report nonqualified deferred compensation or section 457 plan payments and deferrals (contributions) on Form W-2 because both payments and deferrals occurred during the year, show the amount of wages earned by the employee during the tax year. Late taxes Generally, the wages earned will be the compensation reported in block 1 of Form W-2 less payments from a nonqualified deferred compensation (or 457) plan, but including any amounts deferred under the plan during the tax year (See IRS Publication 957). Late taxes Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404. Late taxes 702. Late taxes The information that you provide will be used in making a determination regarding the amount of Social Security benefits payable to the above named individual. Late taxes While your response is voluntary, if you do not respond we may not be able to make a correct determination regarding the amount of Social Security benefits payable to the above named individual for the year in question. Late taxes We may also use the information you give us when we match records by computer. Late taxes Matching programs compare our records with those of other Federal, State, or local government agencies. Late taxes Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. Late taxes The law allows us to do this even if you do not agree to it. Late taxes Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. Late taxes If you want to learn more about this, contact any Social Security Office. Late taxes The Paperwork Reduction Act: This information collection meets the clearance requirements of 44 U. Late taxes S. Late taxes C. Late taxes §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. Late taxes You are not required to answer these questions unless we display a valid Office of Management and Budget control number. Late taxes We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. Late taxes Form SSA-131 (8-2001) EF (06-2002)   Submit Form SSA-131 to the SSA office nearest your place of business. Late taxes Or, the employee can submit it to the SSA office handling the claim. Late taxes You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. Late taxes If reporting on more than one employee, complete a separate Form SSA-131 for each employee or use the paper listing format (except for reporting nonqualified and section 457 plan deferrals and payments) in Table 3. Late taxes Do not report payments from nonqualified deferred compensation or section 457 plans that were reported in box 11 of Form W-2. Late taxes Use Form SSA-131 if deferrals to and payments from nonqualified or section 457 plans occurred during the tax year. Late taxes Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments A nonstatutory (nonqualified) option to purchase stock which is exercised in a year after the year in which the option was earned is a special wage payment. Late taxes It should not count for the social security earnings test. Late taxes Nonstatutory (nonqualified) options exercised as special wage payments by retired employees or employees who continue to work while receiving social security benefits should be reported by employers using the above reporting methods. Late taxes Nonqualified Deferred Compensation and Section 457 Plans A nonqualified deferred compensation plan is a plan or arrangement established and maintained by an employer for one or more of its employees that provides for the deferral of compensation, but does not meet the requirements for a tax-qualified deferred compensation plan. Late taxes For social security and Medicare purposes, deferred compensation plans for employees of state and local governments (section 457 plans) are treated the same as nonqualified plans. Late taxes Nonqualified and section 457 plans are reported differently than other special wage payments. Late taxes See Reporting Amounts Deferred to Nonqualified and Section 457 Plans below for specific instructions. Late taxes Reporting Amounts Deferred to Nonqualified and Section 457 Plans Generally, when the related services are performed, nonqualified deferred compensation is subject to social security and Medicare tax when deferred. Late taxes However, if nonqualified and section 457 plans contain provisions that delay the employee's right to receive payments from the plan, a period of substantial risk of forfeiture exists. Late taxes The plans' deferrals, or contributions, are not subject to social security and Medicare taxes until the period of substantial risk of forfeiture ends. Late taxes No risk of forfeiture. Late taxes   If there is no risk of forfeiture, report wage amounts deferred to a nonqualified deferred compensation or section 457 plan in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Late taxes Example. Late taxes Company X's nonqualified deferred compensation plan allows the deferral of up to $20,000 of employee salaries each year. Late taxes The plan has no risk of forfeiture. Late taxes In 2012, Employee A defers $20,000 to the plan from a total salary of $200,000. Late taxes Form W-2 Completion Amount Box 1 $200,000 Box 3* 110,100 Box 5 200,000 *Wage base maximum for tax year 2012 Risk of forfeiture lapses before retirement. Late taxes   If the substantial risk of forfeiture lapses before the employee retires, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Late taxes The accumulated deferrals are reported along with any other social security and Medicare wages earned during the year. Late taxes   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. Late taxes If the employee continues working, future deferrals are social security and Medicare wages when they are earned. Late taxes    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Late taxes Risk of forfeiture lapses at retirement. Late taxes   When an employee's right to a payment is contingent upon working until retirement, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, as social security and/or Medicare wages in the year of retirement. Late taxes Add the amount to other wages paid in that year, and enter in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Late taxes   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. Late taxes    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Late taxes Example—risk of forfeiture. Late taxes At the end of the risk-of-forfeiture period for Company Y's nonqualified deferred compensation plan, Employee B's accumulated deferrals, plus interest earned by the plan, are $120,000, not including B's $20,000 deferral for this year. Late taxes B's wages, including this year's deferred amount, are $80,000. Late taxes Form W-2 Completion Amount Box 1 $60,000 Box 3* 110,100 Box 5 200,000 Box 11 120,000 *Wage base maximum for tax year 2012 Reporting Payments From Nonqualified and Nongovernmental Section 457 Plans When an employee or former employee retires and begins receiving payments (distributions) from a nonqualified or nongovernmental section 457 plan, report the payments in boxes 1 and 11 of Form W-2. Late taxes Report payments (distributions) from a governmental section 457 plan on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Late taxes Example. Late taxes Employee D retired from the XYZ company and began receiving social security benefits. Late taxes XYZ paid D a $12,000 bonus upon retirement for sales made in a prior year, and D received $25,000 in payments from XYZ's nonqualified deferred compensation plan. Late taxes In addition, D agreed to continue performing services for XYZ, but on a part-time basis for wages of $15,000 per year. Late taxes D made no deferrals to the nonqualified plan this year. Late taxes Form W-2 Completion Amount Box 1 $52,000 Box 3 27,000 Box 5 27,000 Box 11 25,000 Report the $12,000 bonus to the SSA using electronic reporting, a paper listing, or Form SSA-131. Late taxes For more information, see Reporting Special Wage Payments , earlier. Late taxes Reporting Payments and Deferrals in the Same Year Do not complete box 11 when payments (distributions) are made from a nonqualified plan and deferrals are reported in boxes 3 and/or 5 of Form W-2 (including current year deferrals). Late taxes Report to the SSA on Form SSA-131 the total amount the employee earned during the tax year. Late taxes Normally, the amount earned is the amount reported in box 1 of Form W-2 less payments from a nonqualified or section 457 plan, but including any amounts deferred under the plan during the tax year. Late taxes See Form SSA-131 and its instructions, earlier. Late taxes Example. Late taxes Employee K retired this year from Company XYZ and began receiving social security benefits. Late taxes During the year he earned wages of $50,000 and deferred $35,000 of the wages into the company's nonqualified deferred compensation plan. Late taxes K also received $75,000 in payments from the company's nonqualified plan. Late taxes Form W-2 Completion Amount Special Wage Payment $75,000 Wages 50,000 Minus: deferral 35,000 Total reported in Box 1 $90,000     Wages including deferral reported in  Boxes 3 and 5 $50,000     Leave Box 11 blank. Late taxes File Form SSA-131 -0-     Form SSA-131 Completion Amount from Box 1 of Form W-2 $90,000 Minus: payments from a nonqualified plan 75,000 Plus: amounts deferred into the plan during the year 35,000 Total wages earned for purposes of Form SSA-131 (item 6) $50,000 Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) Plans It is not necessary to show amounts deferred during the year under an NQDC plan subject to section 409A. Late taxes If you report section 409A deferrals, show the amount in box 12 of Form W-2 using code Y. Late taxes For more information, see Notice 2008-115, 2008-52 I. Late taxes R. Late taxes B. Late taxes 1367, available at www. Late taxes irs. Late taxes gov/irb/2008-52_IRB/ar10. Late taxes html. Late taxes Special reporting rules apply when an NQDC plan is not compliant with section 409A (when there has been a “plan failure”). Late taxes Income included under section 409A from an NQDC plan is reported in box 1 and box 12 of Form W-2 using code Z. Late taxes See Notice 2008-115. Late taxes The following examples use small dollar amounts for illustrative purposes. Late taxes However, the amount reported in box 3 of Form W-2 is always limited by the social security earnings wage base (for example, $110,100 for 2012). Late taxes The term “vested” in the following examples means that the amount deferred is not subject to a substantial risk of forfeiture. Late taxes Conversely, the term “not vested” means that the amount deferred is subject to a substantial risk of forfeiture. Late taxes The examples assume that the NQDC plan is in compliance with section 409A, and that amounts deferred under the plan are not includible in gross income as they are deferred. Late taxes For purposes of the examples, it is assumed that the regular pay of the employee is remuneration for employment and wages for employment tax purposes except to the extent the deferral of a portion of the regular pay results in a reduction in wages. Late taxes Example 1: Deferral that is immediately vested (no substantial risk of forfeiture) with no distributions and no vesting of prior-year deferrals. Late taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into her employer’s NQDC plan. Late taxes The deferral of $20 was vested upon deferral and there was an employer match of $10 under the plan, which was also vested. Late taxes Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10. Late taxes Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 vested deferral) $180 Box 3 ($200 Regular pay plus $10 Employer match, vested) 210 Box 5 ($200 Regular pay plus $10 Employer match, vested) 210 Box 11 -0- Example 2: Deferral with delayed vesting (substantial risk of forfeiture) of employee and employer portions (no distributions and no vesting of prior-year deferrals). Late taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. Late taxes The deferral of $20 was not vested upon deferral, and there was an employer match of $10 under the plan, which was also not vested. Late taxes Regular pay = $200; Deferral, not vested = $20; Employer match, not vested = $10. Late taxes Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, not vested) $180 Box 3 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 5 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 11 -0- Example 3: Deferral that is immediately vested with prior-year deferrals and investment earnings on the prior-year deferrals that are now vesting (no distributions). Late taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. Late taxes The deferral of $20 was vested upon deferral. Late taxes During the year, $100 of prior-year deferrals and $15 of investment earnings on the $100 of prior-year deferrals became vested. Late taxes Regular pay = $200; Deferral, vested = $20; Vesting of prior-year deferrals = $100; Vesting of investment earnings on $100 of prior-year deferral = $15. Late taxes Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, vested) $180 Box 3 ($200 Regular pay plus $100 vested prior-year deferral plus $15 earnings on deferral) 315 Box 5 ($200 Regular pay plus $100 vested prior-year deferral plus $15 vested investment earnings on prior year deferral) 315 Box 11 ($100 vested prior-year deferral plus $15 earnings) 115 Example 4: No deferrals but there are distributions (no vesting of prior-year deferrals). Late taxes For the year, the employee’s regular pay was $100, and the employee deferred no pay into the employer’s NQDC plan. Late taxes There was no vesting of prior-year deferrals under the plan. Late taxes During the year, there were total distributions of $50 from the plan to the employee. Late taxes Regular pay = $100; Distribution = $50. Late taxes Form W-2 Completion Amount Box 1 ($100 Regular pay plus $50 Distribution) $150 Box 3 ($100 Regular pay ) 100 Box 5 ($100 Regular pay) 100 Box 11 ($50 Distribution) 50 Special rule for box 11 of Form W-2 (distributions and deferral in the same year). Late taxes   If, in the same year, there are NQDC distributions and there are deferrals that are reportable in boxes 3 and/or 5 (current or prior-year deferrals) of Form W-2, do not complete box 11. Late taxes Instead, report on Form SSA-131 the total amount the employee earned during the year. Late taxes * Submit the SSA-131 to the nearest SSA office or give it to the employee. Late taxes   *Generally, the amount earned by the employee during the tax year for purposes of item 6 of Form SSA-131 is the amount reported in box 1 of Form W-2 plus current-year deferrals that are vested (employee and employer portions) less distributions. Late taxes Do not consider prior-year deferrals that are vesting in the current year. Late taxes If there was a plan failure, the box 1 amount in this calculation should be as if there were no plan failure. Late taxes Example 5: Deferral that is immediately vested and there are distributions (no vesting of prior-year deferrals). Late taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Late taxes There was also an employer match of $10. Late taxes The deferral and employer match were vested upon deferral. Late taxes There was no vesting of prior-year deferrals under the plan. Late taxes During the year, there were total distributions of $50 from the plan to the employee. Late taxes Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10; Distribution = $50. Late taxes Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, vested) $230 Boxes 3 and 5 ($200 Regular pay plus $10 vested employer match) 210 Leave Box 11 blank. Late taxes File Form SSA-131 -0-     Form SSA-131 Completion Item 6 - amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $30 vested current year employee deferral and employer match) $210 Example 6: Deferral with delayed vesting and there are distributions (no vesting of prior-year deferrals). Late taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Late taxes The deferral was not vested upon deferral. Late taxes There was no vesting of prior-year deferrals under the plan. Late taxes During the year, there were total distributions of $50 from the plan to the employee. Late taxes Regular pay = $200; Deferral, not vested = $20; Distribution = $50. Late taxes Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay minus $20 deferral that is not vested) 180 Box 11 ($50 Distribution). Late taxes 50 Example 7: Deferral that is immediately vested and there are distributions (also vesting of prior-year deferrals and earnings on those prior-year deferrals). Late taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Late taxes The deferral was vested upon deferral. Late taxes There was vesting of $100 of prior-year deferrals and $15 of earnings on the $100 prior-year deferral under the plan. Late taxes During the year, there were total distributions of $50 from the plan to the employee. Late taxes Regular pay = $200; Deferral, vested = $20; Distribution = $50; Vesting of prior-year deferrals ($100) and earnings on those prior-year deferrals ($15) = $115. Late taxes Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 vested deferral $230 Boxes 3 and 5 ($200 Regular pay Plus $115 vested prior deferral (with vested earnings on the deferral)) 315 Leave Box 11 blank. Late taxes File Form SSA-131 -0-     Form SSA-131 Completion Item 6, amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $20 vested current year deferral) $200 Example 8: Deferral with delayed vesting and there are distributions (vesting of prior-year deferrals, including employer matches, and earnings on those deferrals). Late taxes For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Late taxes The deferral was not vested upon deferral. Late taxes There was also vesting of prior-year deferrals and employer matches and earnings on these amounts under the plan ($115). Late taxes During the year, there were total distributions of $50 from the plan to the employee. Late taxes Regular pay = $200; Deferral, not vested = $20; Distribution = $50; Vesting of prior-year deferrals and employer match = $100 plus earnings on that $100 of $15. Late taxes Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay plus $115 vested prior-year deferral and prior year employer match and earning on the prior year amounts minus $20 deferral that is not vested) 295 Leave Box 11 blank. Late taxes File Form SSA-131 -0-     Form SSA-131 Completion Item 6 ($230 Amount from Box 1 of Form W-2 minus $50 Distribution) $180 Table 2. Late taxes Specifications for Electronic Reporting of Special Wage Payments Record Position  Field Size   Description Start End 1 3 3 Record Type—must include only the capital letters “SWP” 4 12 9 SSN—must be numeric and may not be all zeros 13 27 15 Last Name—all capitals and no punctuation; may have blanks on right only 28 38 11 First Name—all capitals and no punctuation; may have blanks on right only 39 39 1 Middle Initial—must be either a capital letter or blank 40 48 9 EIN—must be numeric and may not be all zeros 49 59 11 Payment—must be numeric; may not be all zeros; last two digits on right are assumed to be cents; no period or dollar sign 60 63 4 Payment Year—must be only a four-digit year 64 66 3 SSA Office Code—must be numeric and may be all zeros 67 67 1 Payment Type Code—must be the capital letter “T” 68 117 50 Filler  The record format is a fixed length of 117. Late taxes  The file format is ASCII. Late taxes  Submit only one file at a time. Late taxes   Table 3. Late taxes Sample—Paper Listing for Reporting Special Wage Payments to Several Employees Report of Special Wage PaymentsTax Year: Page of A. Late taxes Employer Name: EIN:   Address: Contact Name:     Phone: ( )   . Late taxes 1) B. Late taxes Employee Name: (Last) (First) (MI)   C. Late taxes SSN: D. Late taxes SWP:$ E. Late taxes Type: Other: 2) B. Late taxes Employee Name: (Last) (First) (MI)   C. Late taxes SSN: D. Late taxes SWP:$ E. Late taxes Type: Other: 3) B. Late taxes Employee Name: (Last) (First) (MI)   C. Late taxes SSN: D. Late taxes SWP:$ E. Late taxes Type: Other: 4) B. Late taxes Employee Name: (Last) (First) (MI)   C. Late taxes SSN: D. Late taxes SWP:$ E. Late taxes Type: Other: 5) B. Late taxes Employee Name: (Last) (First) (MI)   C. Late taxes SSN: D. Late taxes SWP:$ E. Late taxes Type: Other:     INSTRUCTIONS:   Enter tax year and page number. Late taxes   A. Late taxes Employer name, employer identification number (EIN), address, the name of a contact person, and a phone number where the contact person can be reached during normal business hours. Late taxes   B. Late taxes Employee's name. Late taxes   C. Late taxes Employee's social security number (SSN). Late taxes   D. Late taxes Total amount of special wage payments made to the employee. Late taxes   E. Late taxes Type of special wage payment from the following list: (1) Vacation Pay, (2) Sick Pay, (3) Severance Pay,  (4) Bonus, (5) Deferred Compensation, (6) Stock Options, and (7) Other—Please explain. Late taxes   Do not use a paper listing for nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in block 11 of Form W-2. Late taxes (Get Form SSA-131. Late taxes )                 Prev  Up  Next   Home   More Online Publications
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Understanding Your CP141I Notice

You are receiving this notice because you did not respond to a previous request for missing or incomplete information on your return.


What you need to do

  • Send the incomplete/missing information described in the “About your return” section on the notice.
  • Include the contact voucher at the end of the notice.
  • Send the amount due to avoid interest charges.

You may want to

  • If the reason your return was incomplete was beyond your control, send us a signed explanation with any supporting documentation.

Answers to Common Questions

Q. What if I disagree with the penalty?

A. Send a written statement with any supporting documentation to the address on the notice.

 

Page Last Reviewed or Updated: 21-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Late Taxes

Late taxes Tax Changes for Businesses Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Electronic Form 1099 Tax Incentives for New York Liberty Zone Other 2001 Changes 2002 ChangesNonaccrual-Experience Method Issuance of Qualified Zone Academy Bonds Depletion Work Opportunity Credit Expanded in New York Liberty Zone Credit For Pension Plan Startup Costs Welfare-to-Work Credit Extended Work Opportunity Credit Extended Electric and Clean-Fuel Vehicles Renewable Electricity Production Credit Later ChangesSpecial Depreciation Allowance Extension of Placed in Service Date Special Liberty Zone Depreciation Allowance for New and Used Property Depreciation of Property Used on Indian Reservations Indian Employment Credit Extended 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). Late taxes However, you can still choose to use the previous carryback period. Late taxes You also can choose not to carry back an NOL and only carry it forward. Late taxes Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. Late taxes Corporations can file Form 1139, Corporation Application for Tentative Refund. Late taxes The instructions for these forms will be revised to reflect the new law. Late taxes Electronic Form 1099 For tax years ending after March 9, 2002, most Forms 1099 can be furnished electronically if the recipient consents, according to IRS regulations, to receive it that way. Late taxes Tax Incentives for New York Liberty Zone New tax benefits are provided for the parts of New York City damaged in the terrorist attacks on September 11, 2001. Late taxes These benefits apply to the newly created New York Liberty Zone, which is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway), in the Borough of Manhattan. Late taxes Tax benefits for the New York Liberty Zone include the following. Late taxes A special depreciation allowance equal to 30% of the adjusted basis of qualified Liberty Zone property. Late taxes It is allowed for the year the property is placed in service. Late taxes No alternative minimum tax depreciation adjustment for qualified Liberty Zone property. Late taxes Classification of Liberty Zone leasehold improvement property as 5-year property. Late taxes Authorization of the issuance of tax-exempt New York Liberty bonds to finance the acquisition, construction, reconstruction, and renovation of nonresidential real property, residential rental property, and public utility property in the Liberty Zone. Late taxes An increased section 179 deduction for certain Liberty Zone property. Late taxes Extension of the replacement period from 2 years to 5 years for certain property involuntarily converted as a result of the terrorist attacks on September 11, 2001, but only if substantially all of the use of the replacement property is in New York City. Late taxes For more information about involuntary conversions, see Postponement of Gain in Publication 547, Casualties, Disasters, and Thefts. Late taxes In addition, for 2002 and 2003, the work opportunity credit is expanded by creating a new targeted group, consisting generally of employees who work in the Liberty Zone or, in certain cases, in New York City outside the Liberty Zone. Late taxes For more information, see Work Opportunity Credit Expanded in New York Liberty Zone under 2002 Changes, later. Late taxes For more information about the 30% special depreciation allowance, Liberty Zone leasehold improvement property, or increased section 179 deduction, see New York Liberty Zone Benefits, in chapter 5. Late taxes In addition, the tax benefits for the Liberty Zone will be covered in a new edition of Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, available later in 2002. Late taxes Other 2001 Changes Other changes are discussed in the following chapters. Late taxes Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Nonaccrual-Experience Method Under current law, if you perform services and use an accrual method of accounting, you do not accrue income which, based on experience, you expect to be uncollectible. Late taxes Beginning in 2002, this rule only applies if you perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting, or your average annual gross receipts for the 3 prior tax years does not exceed $5,000,000. Late taxes As under current law, the nonaccrual-experience method will not apply to amounts on which you charge interest or a late payment penalty. Late taxes For more information, see Nonaccrual-Experience Method in chapter 11 of Publication 535, Business Expenses. Late taxes Issuance of Qualified Zone Academy Bonds State and local governments issue qualified zone academy bonds to raise funds for the use of qualified zone academies. Late taxes The amount of bonds that may be issued was limited to $400 million each year for 1998, 1999, 2000, and 2001. Late taxes This provision has been extended to provide for an additional $400 million of bonds to be issued each year for 2002 and 2003. Late taxes For more information about qualified zone academy bonds, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Late taxes Depletion The suspension of the taxable income limit on percentage depletion from the marginal production of oil and natural gas that was scheduled to expire for tax years beginning after 2001 has been extended to tax years beginning before 2004. Late taxes For more information on marginal production, see section 613A(c) of the Internal Revenue Code. Late taxes Work Opportunity Credit Expanded in New York Liberty Zone The work opportunity credit is expanded to include a new targeted group consisting generally of employees who perform substantially all their services: In the New York Liberty Zone (defined earlier under Tax Incentives for New York Liberty Zone, under 2001 Changes), or Elsewhere in New York City for a business that relocated from the Liberty Zone due to the destruction or damage of its place of business by the September 11, 2001, terrorist attack. Late taxes The credit is available to employers for wages paid to new employees and existing employees for work performed during 2002 or 2003. Late taxes Certain limits apply. Late taxes For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Late taxes Credit For Pension Plan Startup Costs The credit for pension plan startup costs is now allowed for plans that become effective after December 31, 2001. Late taxes Previously, the credit was only allowed for plans established after December 31, 2001. Late taxes For more information on the credit, see Important Changes for 2002 in Publication 560, Retirement Plans for Small Business. Late taxes Welfare-to-Work Credit Extended The welfare-to-work credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. Late taxes For more information on the welfare-to-work credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Late taxes Work Opportunity Credit Extended The work opportunity credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. Late taxes For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Late taxes Electric and Clean-Fuel Vehicles The maximum clean-fuel vehicle deduction and qualified electric vehicle credit were scheduled to be 25% lower for 2002 and both were scheduled to be phased out completely by 2005. Late taxes The full deduction and credit are now allowed for qualified property placed in service in 2002 and 2003. Late taxes The phaseout of the deduction and the credit will begin in 2004, and no deduction or credit will be allowed for property placed in service after 2006. Late taxes For more information about electric and clean-fuel vehicles, see chapter 12 in Publication 535, Business Expenses. Late taxes Renewable Electricity Production Credit The renewable electricity production credit is extended to include electricity produced by facilities placed in service after 2001 and before 2004. Late taxes Later Changes Special Depreciation Allowance You can claim the special depreciation allowance (an additional 30% depreciation deduction) for new property that you acquire before September 11, 2004, and place in service for your business generally before January 1, 2005, if you meet the other requirements for qualified property covered in chapter 5. Late taxes Accordingly, you will generally no longer be able to claim the special depreciation allowance for the qualified property if you acquire it after September 10, 2004, or place it in service for your business after December 31, 2004. Late taxes However, you will be able to claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for most qualified property if you place it in service in the Liberty Zone after December 31, 2004, and generally before January 1, 2007, provided you meet the other requirements for qualified Liberty Zone property covered in chapter 5. Late taxes Extension of Placed in Service Date To qualify for the special depreciation allowance, your property must meet certain tests, including the placed in service date test, as well as the other requirements covered in chapter 5 of this publication. Late taxes To meet the placed in service date test, your property must generally be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Late taxes However, certain property placed in service before January 1, 2006, may meet this test. Late taxes Transportation property and property with a recovery period of 10 years or longer meet the test if one of the following applies. Late taxes The property has an estimated production period of more than 2 years. Late taxes The property has an estimated production period of more than 1 year and it costs more than $1 million. Late taxes Transportation property is any tangible personal property used in the trade or business of transporting persons or property. Late taxes For property that qualifies for the special depreciation allowance solely because of the one-year extension of the placed in service date, only the part of the basis attributable to manufacture, construction, or production before September 11, 2004, is eligible for the special depreciation allowance. Late taxes Special Liberty Zone Depreciation Allowance for New and Used Property You can claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for used property that you acquire after September 10, 2001, if the property meets the requirements listed under Qualified Liberty Zone Property in chapter 5 of this publication. Late taxes You will be able to claim the allowance for both new and used property that you acquire after September 10, 2004, provided the property meets the other requirements for qualified Liberty Zone property. Late taxes Depreciation of Property Used on Indian Reservations The special depreciation rules that apply to qualified property used on an Indian reservation were scheduled to expire for property placed in service after 2003. Late taxes These special rules have been extended to include property placed in service in 2004. Late taxes For more information about these rules, see Publication 946, How To Depreciate Property. Late taxes Indian Employment Credit Extended The Indian employment credit that was scheduled to expire for tax years beginning after 2003 has been extended to include a tax year beginning in 2004. Late taxes For more information about this credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Late taxes Prev  Up  Next   Home   More Online Publications