How do I report Simple IRA contributions on a W-2?

Savings Incentive Match Plans for Employees, or SIMPLE IRAs, are designed for small businesses as a way to offer a retirement savings plan for employees. Contributions are made via salary deferral by the participant. Employers choose between making matching contributions based on employee contributions, called elective contributions, or through non-elective contributions. Employers can match up to 3% of a participant employee's annual salary and contribute each year to the plan or make non-elective contributions equal to 2% of each eligible employee's pay, regardless of whether the employee makes elective deferrals.

As the SIMPLE IRA works similarly to other employer-sponsored retirement plans, such as a 401(k) plan, the salary deferral contributions are reported on each participant employee's W-2. On Form W-2 for employee compensation, SIMPLE IRA contributions made by the employee are deducted from the "wages, tips and other compensation" box, and box 13 "retirement plan" is selected. The dollar amounts for the total annual contributions are not listed specifically but, rather, figured and reported by the taxpayer. The salary reduction contributions are subject to Social Security and Medicare taxes, however, s\o contribution amounts are added back into earnings for these boxes, which are numbers 3 and 5 respectively on Form W-2.

Employee participants report their contributions for the year on Form 1040, Line 28. Meanwhile, the employer receives a deduction for any matching contributions made to the participant on Schedule C of the company's business tax return. Since the contributions are deductible for the employer, the company's matching dollars are not reported on Form W-2 for the employee.