University Tax Office Advises Staff about ARRA Tax Credit and W-2 Forms - 01/26/10

Most Purdue University employees may notice that their 2009 W-2 form shows a substantial reduction in federal tax withholdings, compared to their 2008 W-2. The reduction results from revised tax tables issued in early 2009 as part of the American Recovery and Reinvestment Act (ARRA), commonly referred to as the stimulus plan.

To take full advantage of the ARRA tax credit, employees may need to file a Schedule M with their 2009 tax return.

Instructions for Schedule M can be found on the IRS Web site. Another IRS Web page provides additional information about Schedule M.

The Schedule M form can be downloaded from the IRS Web site, although most tax software for home preparation (TurboTax, H&R Block Online, etc.) incorporates the tax credit into their calculations.

All W-2 forms were mailed Jan. 20. Purdue employees who do not receive their W-2 by Jan. 30 may submit a request for a duplicate. See instructions for requesting a duplicate tax form on the University Tax Office Web site.

The Tax Office has received numerous questions about Box 1 on the W-2. Here’s how federal wages (box 1) are calculated:

Using the employee’s final pay stub of the year --
1. Under “Earnings” heading, total year-to-date (YTD) earnings
2. Under “Pre-Tax Deductions” heading, subtract total YTD pre-tax deductions
3. Under “Taxable Benefits” heading, add total YTD taxable benefit.

To get the Social Security and Medicare taxable wages (boxes 3 and 5), take the amount in Box 1 and add back any retirement contributions that were included in the total YTD pre-tax deductions from Step 2 above.

Individuals with questions regarding their W-2 may contact Staff should address questions about their specific tax situation to their tax advisor or tax return preparer.