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Nonqualified deferred compensation

Forum|Forum|3 years ago
February 19, 2023
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I receive deferred compensation from my former employer. It is reported via a W-2. Box 11 (nonqualified plans) is populated with the same amount as Box 1. In past years, Turbo Tax has treated that as ordinary income, and listed it in the income section of the 1040. But this year, this income appears on Schedule 1, line t. Why the difference?

Best answer by DMarkM1

Yes, you are correct. For some reason the IRS added the line 8t to break out non-qualified/deferred compensation. However they also state in the form W2 instructions that the amount in box 11 remains in box 1 on the W2 so there is a disconnect in the IRS system.

Of course the income should not be in both places on the 1040 (line 1a and line 8). Additionally, whether the income is on line 1a or line 8 it is taxed the same.

Further, Box 11 is informational for the taxpayer, it used by the Social Security Administration to verify that they have properly applied the social security earnings test and paid the correct amount of benefits. The SSA already has their copy of your W2 for their purposes.

With that in mind enter your W2 exactly as shown on your form. When you arrive at the follow on question asking "Did you take money out of a nonqualified pension plan?" You should answer "NO" that will leave the money on line 1a and not create the schedule 1 line 8t entry.

This will eliminate the rejection and your tax calculation will not be affected.

DMarkM1Answer

Yes, you are correct. For some reason the IRS added the line 8t to break out non-qualified/deferred compensation. However they also state in the form W2 instructions that the amount in box 11 remains in box 1 on the W2 so there is a disconnect in the IRS system.

Of course the income should not be in both places on the 1040 (line 1a and line 8). Additionally, whether the income is on line 1a or line 8 it is taxed the same.

Further, Box 11 is informational for the taxpayer, it used by the Social Security Administration to verify that they have properly applied the social security earnings test and paid the correct amount of benefits. The SSA already has their copy of your W2 for their purposes.

With that in mind enter your W2 exactly as shown on your form. When you arrive at the follow on question asking "Did you take money out of a nonqualified pension plan?" You should answer "NO" that will leave the money on line 1a and not create the schedule 1 line 8t entry.

This will eliminate the rejection and your tax calculation will not be affected.

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