IRS highlights SECURE 2.0 impact on Forms W-2 and 1099-R

The IRS released a fact sheet (FS-2024-29) highlighting various retirement plan reporting implications of the SECURE 2.0 Act on Forms W-2 and 1099-R starting in tax year 2023.

The fact sheet follows IRS guidance (Notice 2024-2) published in the form of questions and answers on 12 of the new provisions added by the Setting Every Community Up for Retirement Enhancement Act of 2022 (SECURE 2.0), which was enacted on Dec. 29, 2022 (see our prior article on this notice).

The fact sheet highlights the following provisions as potentially affecting Forms W-2 (including Forms W-2AS, W-2GU and W-2VI):

• De minimis financial incentives (Section 113 of the SECURE 2.0 Act) — If an employer offers such incentives, it is considered part of the employees’ income and is subject to regular tax withholding unless there is a specific exemption.
• 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) — Salary reduction contributions to Roth SEP or Roth SIMPLE IRAs are subject to federal employment taxes and should be included in boxes 1, 3, 5, and box 12 of Form W-2. Employer matching and nonelective contributions are not subject to federal employment tax withholding, but the amounts must be reported I for the year contributed on boxes 1 and 2a of Form 1099-R with code 2 or 7 in box 7, and the IRA/SEP/SIMPLE checkbox checked.
• Optional treatment of employer nonelective or matching contributions as Roth contributions (Section 604 of the SECURE 2.0 Act) — These contributions are not subject to federal employment tax withholding. However, designated Roth nonelective contributions (including contributions that would be treated as matching contributions if the plan were a qualified plan) made to a governmental section 457(b) plan are subject to special rules addressed in Q&A L-7 of Notice 2024-2. Unlike regular Roth contributions, designated Roth nonelective and matching contributions must be reported for the year allocated in boxes 1 and 2a of Form 1099-R with a code “G” in box 7.

The new fact sheet provides a table that summarizes the reporting requirements and reminds businesses that various copies (excluding Copy A) of Forms W-2 (including Forms W-2AS, W-2GU and W-2VI) may be completed and printed on IRS.gov for recipients. Notably, information entered on one copy (excluding Copy A) will automatically appear on the others. Copy A cannot be completed online to print and file with the Social Security Administration.

The fact sheet also provides that if a business filed 2023 Forms W-2 without following these new guidelines, they may need to file Forms W-2C to correct any errors.

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