What does Cafe 125 mean on a W-2 form?

What does Cafe 125 mean on a W-2 form?

cafeteria
Under a cafeteria, or Section 125, plan, you pay for your employer-sponsored benefits with pretax money. Your employer deducts your payments from your wages before withholding certain taxes. It may, however, choose to report certain benefits on your W-2 and code them as Café 125.

Can I deduct Cafe 125?

Having Cafe 125 reported on your W-2 does not change the way you prepare and file your tax return. Also, remember that these benefits are paid for with pre-tax dollars so they are not eligible to be used as a deduction on your return.

What is Section 125 on my paycheck?

A Section 125 Plan is a written plan that gives employees the option to choose between cash and qualifying benefits that are pre-taxed. The employee usually pays less in federal income and/or FICA taxes because the employee’s contribution is withheld before taxes.

Is a cafeteria plan worth it?

Cafeteria plans are particularly good for participants who have regular expenses related to medical issues and child care.

What is the less other Cafe 125 on w2?

SECTION 125 is your employer’s benefit plan. It is also known as a “cafeteria plan”. Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you can not deduct them as medical expenses.

What does less Other Cafe 125 mean on my taxes?

cafeteria plan
SECTION 125 is your employer’s benefit plan. It is also known as a “cafeteria plan”. Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you can not deduct them as medical expenses.

Is Section 125 Mandatory?

IRS Requirement for pre-taxed employee benefits. If you are an employer wanting to allow your employees to pay group health and other insurance premiums with pre-tax salary deductions, the answer is yes, you need a Section 125 plan document. However, that tax-advantaged treatment is not automatic.

What is the difference between a cafeteria plan and a Section 125 plan?

A cafeteria plan, also known as a section 125 plan, is a written plan that offers employees a choice between receiving their compensation in cash or as part of an employee benefit. Employer contributions toward an employee’s cafeteria-plan benefits are not taxed.

Is a Section 125 plan worth it?

Section 125 plans offer employees significant tax savings and could be an appealing part of any benefits package. Offering an appealing compensation plan is a great way to attract and retain employees, but a quality compensation plan includes not just a high salary but also an attractive benefits package.

How much does it cost to set up a Section 125 plan?

Core Documents provides employers with everything they need to establish an IRS- and DOL-compliant Section 125 benefits plan in PDF format for just $99. This cost reflects a one-time setup fee, not an annual charge. For more information on ordering, including a fax option, go to the Core125 package page.

What are the requirements for a 125 cafeteria plan?

Section 125 Cafeteria Plan Requirements. To qualify as a Cafeteria Plan, the plan must include: At least one taxable benefit option (considered part of the employee’s salary), and. At least one qualified pre-tax benefit.

What is 125 cafeteria plans?

Share this: A Section 125 Cafeteria Plan is an employer-sponsored benefits plan that lets employees pay for certain qualified medical expenses – such as health insurance premiums – on a pre-tax basis.

What is covered under Section 125?

A section 125 plan document outlines specific details, such as a description of the employee benefits that are covered through the plan and what they cost. It also includes participation rules, annual limits, and election procedures like what constitutes a qualifying event, such as a spouse’s job loss or a move.

What are the benefits of Section 125 cafeteria plan?

A section 125 or “cafeteria” plan allows employees to withhold a portion of their pre-tax salary to cover certain medical or child-care expenses. Because these benefits are free from federal and state income taxes, an employee’s taxable income is reduced, which increases the percentage of their take-home pay.