Tax question entry

Cafeteria 125 plans are covered under Section 125 of the Internal Revenue Code. If you have this pretax benefit on your W-2, in box 14, then you can select New York IRC 125 / Sec 18 if you have a NY employer. However, please note that there are two choices - New York IRC 125 / Sec 18 Subject to NY tax and New York IRC 125 / Sec 18 NY tax exempt. 

Generally, cafeteria plans allow employees to set aside pre-tax income for certain benefits. Cafeteria 125 amounts on your W-2 are your pre-tax benefit and are already deducted from your W-2 amounts. These pre-tax benefits aren't subject to federal, Social Security, or Medicare taxes. 

However, you may have to add back this pre-tax benefit for state purposes. For example, the amount for certain IRC125 programs must be added back to the New York State return and is subject to NYS and city taxes (if applicable). In this situation, coding the box 14 W-2 amount as NY IRC125 / Sec 18 Subject to Tax, will flow to the Form IT-225 and Line 23 of the IT-201. If New York IRC 125 / Sec 18 NY tax exempt was chosen, the benefit amount would not flow to the state return. 

For more information, please see What is Cafe 125 on my W-2 form?