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Question: Last year we had several employees question why we listed dependent care benefits on Form W-2, box 10.  This amount reflected dependent care expense which was deferred into their flexible spending account.  Can you confirm that deferrals to dependent care flexible spending accounts should be listed in this box?

A: Yes, you were correct by adding the dependent care benefits in Box 10 of Form W-2.  The amount in Box 10 (up to $5,000) is offset on Form 2441 when they file their tax returns. 

Q: Our Local Services Tax rate is $10.  We employ many part-time people.  Am I correct that since our tax rate is only $10 the Income Exemption does not apply?

A: Yes, you are correct, they will not qualify for the $12,000 Income Exemption.  The Income Exemption only applies if the Local Service Tax rate is greater than $10.

Q: We have a partially-retired employee age 70.  Should I still be withholding Medicare Tax since he is over full retirement age of 66?

A: Yes, Medicare Tax must be withheld on all wages.  When an employee reaches full retirement age, their Social Security payments are not affected by the amount they are earning.

These questions were asked at one of our annual December Payroll Seminars presented in Hanover, Camp Hill and York by Payroll and Tax Specialist Crystal Martin. Please contact Crystal at 717-757-6999 or 800-745-8233 if you have a question for her. You can also email Crystal by using the form below. Dates for this year's seminars will soon be posted on our website.


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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any US tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.