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					      R ANDOLPH G . B ACHRACH
               ATTORNEY AT LAW
              5103 E. THOMAS ROAD
            PHOENIX, ARIZONA 85018
                   (602) 852-9540
              (AZ #12621 - CA #93278)


             Attorney for Plaintiff


                                    United States District Court
                                        FOR THE DISTRICT OF ARIZONA


                                                           No.: CV 04 0493 PHX FJM
      DAVID L. MAZET,
                                                           REPLY IN SUPPORT OF
                                        Plaintiff,         PLAINTIFF’S MOTION FOR
                                                           SUMMARY JUDGMENT
      vs.
                                                           and
      HALLIBURTON COMPANY LONG-
      TERM DISABILITY PLAN; and,                           RESPONSE TO DEFENDANTS’
      HARTFORD LIFE & ACCIDENT                             CROSS-MOTION FOR
      INSURANCE COMPANY,                                   SUMMARY JUDGMENT
                                        Defendants.

 1           Plaintiff submits the following: 1) Reply in Support of his Motion for Summary
 2   Judgment Following Administrative Decision on Remand (“MSJ”); and, 2) Response to
 3   Defendants’ Cross-motion for Summary Judgment (X-MSJ):
 4                             MEMORANDUM OF POINTS & AUTHORITIES
 5           I.       Preliminary statement.
 6           Hartford’s Response to Plaintiff’s MSJ and its X-MSJ on the remand issue lack
 7   substantial support in the evidence and the record. Thus, Plaintiff is entitled to judgment on
 8   the remand issue of whether or not Hartford properly calculated the amount of Mr. Mazet’s
 9   predisability earnings. The evidence shows that Hartford relied upon inaccurate wage
10   information from the employer and incorrectly calculated Mr. Mazet’s pre-disability earnings.
11   This error had a substantial negative impact both on the correct amount of “own occupation”
12   benefits to which Mr. Mazet was entitled, and, on the subsequent decision to deny Mr. Mazet
13   continuing “any occupation” disability benefits. Because Mr. Mazet’s voluntary contributions



     Case 2:04-cv-00493-FJM              Document 67   Filed 08/31/2007   Page 1 of 27
                                                                  1   to his 401(k) plan were improperly omitted from his predisability earnings the Plan
                                                                  2   Administrator is required to correctly recalculate the amount of such benefits.
                                                                  3          Hartford’s claim forms required the employer to provide copies of Mr. Mazet’s W-2
                                                                  4   wage statements to support the amount of his predisability earnings. Yet, Hartford then
                                                                  5   (during the initial claim) and now (on remand) has consciously avoided these documents
                                                                  6   even though Mr. Mazet made them available to Hartford and its counsel prior to the remand
                                                                  7   process and decision. This is an impermissible self-serving decision by the Plan
                                                                  8   Administrator. Hartford’s decision on remand is both wrong and constitutes a violation of its
                                                                  9   fiduciary duties as an ERISA plan administrator.
                                                                 10          II.    Relevant Ninth Circuit case law, since the time of this Court’s previous
                                                                 11                 grant of summary judgment to Defendants, requires a de novo standard of
                                                                 12                 review.
RANDOLPH G. BACHRACH




                                                                 13          Hartford asserts that “the abuse-of-discretion standard applies” to the pending motions
                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 14   because the Court previously so ruled with respect to the prior MSJ. (Defts’. Response & X-
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 15   MSJ, 5:20). In light of subsequent relevant case law, this is no longer the case. As the Court
                                                                 16   is aware, Hartford never responded to Mr. Mazet’s administrative appeal. Nevertheless, the
                                                                 17   Court declined to follow Jebian v. Hewlett-packard Co. Employee Benefits Org. Income Prot.
                                                                 18   Plan, 349 F.3d 1098 (9th Cir. 2003) and ruled that deferential review would apply based upon
                                                                 19   the decision in Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978 (9th Cir. 2005).
                                                                 20   (ORDER re Standard of Review, Docket # 38.) Since the time of the Court’s initial Order (re
                                                                 21   Standard of Review), the Ninth Circuit has issued its decision in Abatie v. Alta Health & Life
                                                                 22   Ins. Co., 458 F.3d 955 (9th Cir. 2006). Citing Jebian as an example of “that rare class of
                                                                 23   cases” justifying de novo review (notwithstanding discretionary plan language), the Abatie
                                                                 24   Court held that:
                                                                 25                         In general, we review de novo a claim for benefits when an
                                                                 26                 administrator fails to exercise discretion. See Jebian, 349 F.3d at
                                                                 27                 1106 (holding that an administrator failed to exercise its discretion
                                                                 28                 when it did not make a benefits decision within the 60 days
                                                                 29                 specified by the terms of the plan and the applicable regulation, so
                                                                 30                 that the ultimate decision rendered was "undeserving of
                                                                 31                 deference"). Other circuits have also held that review is de novo

                                                                                                                     2

                                                                      Case 2:04-cv-00493-FJM        Document 67       Filed 08/31/2007      Page 2 of 27
                                                                  1                 when the plan administrator fails to exercise discretion. See
                                                                  2                 Nichols v. Prudential Ins. Co. of Am., 406 F.3d 98, 109 (2d Cir.
                                                                  3                 2005) (holding that a "deemed denied" claim, in which the
                                                                  4                 administrator did not issue a decision within the time required by
                                                                  5                 the regulations, constituted "inaction," which was not an exercise
                                                                  6                 of discretion and which therefore was entitled to no deference; de
                                                                  7                 novo review applied); Gilbertson v. Allied Signal, Inc., 328 F.3d
                                                                  8                 625, 632 (10th Cir. 2003) (noting that "[d]eference to the
                                                                  9                 administrator's expertise is inapplicable where the administrator
                                                                 10                 has failed to apply his expertise to a particular decision"); Gritzer
                                                                 11                 v. CBS, Inc., 275 F.3d 291, 296 (3d Cir. 2002) ("Where a trustee
                                                                 12                 fails to act or to exercise his or her discretion, de novo review is
                                                                 13                 appropriate because the trustee has forfeited the privilege to apply
                                                                 14                 his or her discretion.. . . "). Similarly, when a plan administrator's
                                                                 15                 actions fall so far outside the strictures of ERISA that it cannot be
                                                                 16                 said that the administrator exercised the discretion that ERISA
                                                                 17                 and the ERISA plan grant, no deference is warranted.
                                                                 18
                                                                 19                        This case does not, however, fall into that rare class of
                                                                 20                 cases. Instead, we face the more ordinary situation in which a plan
                                                                 21                 administrator has exercised discretion but, in doing so, has made
                                                                 22                 procedural errors. We turn, finally, to a discussion of how we are
RANDOLPH G. BACHRACH




                                                                 23                 to consider such procedural errors in reviewing a denial of
                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 24                 benefits.
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 25   458 F.3d 955, at 972.
                                                                 26   A plain reading of the decision in Abatie is that, as a matter of law, failing to exercise
                                                                 27   discretion (a fortiori, never responding to an administrative appeal, as here) rises to that level
                                                                 28   of fiduciary breach sufficient to warrant the forfeiture of deferential review. Accordingly,
                                                                 29   Plaintiff requests that the Court revisit the issue of the appropriate standard of review.
                                                                 30   Because the entire case should be reviewed under a single consistent standard, Plaintiff
                                                                 31   requests that the remand issue (now before the Court) and the initial grant of judgment to
                                                                 32   Defendants (by way of reconsideration and supplemental briefs) be determined under the
                                                                 33   appropriate de novo standard of review.
                                                                 34          III.   Significant inconsistencies in the employer’s several verifications of pre-
                                                                 35                 disability salary amounts is evidence of lack of reliability and credibility.
                                                                 36          As Defendants’ brief points out, Mr. Mazet’s employer has supplied different wage
                                                                 37   figures in response to several requests for verification of pre-disability earnings. (Defts’.
                                                                 38   Response & X-MSJ, 4:13). This discrepancy is not insignificant and is clear evidence that the
                                                                 39   employer’s wage verifications are not reliable and lack substantial credibility. Given these

                                                                                                                       3

                                                                      Case 2:04-cv-00493-FJM         Document 67        Filed 08/31/2007     Page 3 of 27
                                                                  1   significant discrepancies it is inexcusable that the employer did not support its statements
                                                                  2   with employment documents, including, Mr. Mazet’s W-2 wage statements, especially, since
                                                                  3   Hartford requested such documentary support during the initial claim. It is equally
                                                                  4   inexcusable that Hartford intentionally refused to enforce its own written requirements either
                                                                  5   during the initial claim processing or during the recent remand process. (See, Docket #22,
                                                                  6   Plaintiff’s SOF/MSJ, Exhibit 3, CF-00540.)
                                                                  7          Further evidence that the employer’s wage verification lacks substantial credibility
                                                                  8   exists on the face of the statement itself. The more recent (2007) employer wage verification
                                                                  9   states that Mr. Mazet’s “current rate is [$]16.90 hour at time of separation.” (Defts’.
                                                                 10   Response & X-MSJ, 4:3). This is impossible and absurd because that amounts to only
                                                                 11   $2,974.40/mo., which is far less than any previous verified earnings statement. And, it is
RANDOLPH G. BACHRACH




                                                                 12   thousands of dollars less than the amount reported to the I.R.S. by the employer on Mr.
                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 13   Mazet’s 1999 W-2 wage statements. It is obvious that the employer’s unsupported wage
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 14   statements cannot and should not be trusted.
                                                                 15          IV.      401(k) retirement plan “deferred compensation” remains compensation.
                                                                 16          Hartford correctly notes that “[t]he monthly rate of basic earnings provided by
                                                                 17   Halliburton does not appear to include Mazet's ‘deferred compensation’” (see, Defts’.
                                                                 18   Response & X-MSJ, 4:19). Mr. Mazet’s contributions to his 401(k) plan, as reported by the
                                                                 19   employer on his W-2 wage statements, show that these were voluntary “deferred
                                                                 20   compensation” contributions from Mr. Mazet’s regular earnings. No part of these
                                                                 21   contributions were paid by Mr. Mazet’s employer. Mr. Mazet received no “extra”
                                                                 22   compensation or other “benefit” from the employer with respect to his 401(k) retirement plan.
                                                                 23   This is a fact which is absolutely verified by the manner in which these contributions were
                                                                 24   reported (i.e., the “box” which was utilized to report these amounts) on Mr. Mazet’s W-2s, by
                                                                 25   the employer.
                                                                 26          Hartford feigns ignorance with respect to Mr. Mazet’s “deferred compensation” and
                                                                 27   the basic 401(k) rules of reporting contributions. (Defts’. Response & X-MSJ, ). For

                                                                                                                     4

                                                                      Case 2:04-cv-00493-FJM        Document 67        Filed 08/31/2007     Page 4 of 27
                                                                  1   example. Hartford argues: “[t]he 1999 form gives no indication what “Code D” is” (Defts’.
                                                                  2   Response & X-MSJ, 4:22); “Mazet’s wage and tax statement gives no indication exactly
                                                                  3   what his deferred compensation includes” (Defts’. Response & X-MSJ, 4:25); “. . .
                                                                  4   Hartford determined that deferred compensation does not count because it is not
                                                                  5   ‘regular monthly pay from the Employer . . . .’” (Defts’. Response & X-MSJ, 5:10); “[Mr.
                                                                  6   Mazet] asserts—with no citation to the record—that what his W-2 forms list as ‘DEF
                                                                  7   COMP 401(k)’ represents ‘fully self-funded and voluntary contributions from his salary
                                                                  8   into his 401(k) retirement plan . . . .’” (Defts’. Response & X-MSJ, 6:14); and, “. . . it is
                                                                  9   equally possible that Mazet’s deferred compensation actually represents Halliburton’s
                                                                 10   contributions to Mazet’s 401(k), or some form of bonus, commission, or extra
                                                                 11   compensation that was deposited into that account” (Defts’. Response & X-MSJ, 7:15).
RANDOLPH G. BACHRACH




                                                                 12          Even a cursory examination of I.R.S. Form W-2 instructions would have revealed to
                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 13   Hartford that all of the “deferred compensation” reported by Mr. Mazet’s employer on his W-
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 14   2 wage statements consisted of voluntary contributions from his regular earnings. The year at
                                                                 15   issue is 1999. Mr. Mazet’s W-2 statement for that year shows the amount of $8,785.65
                                                                 16   entered as Code “D” in box No. 13. (See, Plaintiff’s SOF/MSJ, Exh. 3.) The I.R.S.
                                                                 17   Instructions for box 13 (1999 Form W-2) provides, in relevant part:
                                                                 18                   Also, include elective deferrals to certain qualified cash or
                                                                 19                   deferred compensation arrangements and to retirement
                                                                 20                   arrangements described in box 13, in codes D, E, F, G, and S,
                                                                 21                   even though the deferrals are not includible in box 1.
                                                                 22   (Exhibit 1, attached, Internal Revenue Service: Instructions for Forms W-2 and W-3 (1999) ,
                                                                 23   page 7 (emphasis added). And, the Instructions explain the meaning of the various “code”
                                                                 24   designations:
                                                                 25                   [Code] D — Elective deferrals to a section 401(k) cash or
                                                                 26                   deferred arrangement.
                                                                 27   Id., page 9 (emphasis added).
                                                                 28   Finally, I.R.S. informational guidelines provide a defining statement regarding 401(k) Plans
                                                                 29   which repudiates in full Hartford’s arguments and unmasks its pretended ignorance:

                                                                                                                      5

                                                                      Case 2:04-cv-00493-FJM          Document 67      Filed 08/31/2007     Page 5 of 27
                                                                  1                 A section 401(k) plan is a type of tax-qualified deferred
                                                                  2                 compensation plan in which an employee can elect to have the
                                                                  3                 employer contribute a portion of his or her cash wages to the plan
                                                                  4                 on a pre–tax basis. These deferred wages (commonly referred to
                                                                  5                 as elective deferrals) are not subject to income tax withholding at
                                                                  6                 the time of deferral, and they are not reflected on your Form 1040
                                                                  7                 (PDF) since they were not included in the taxable wages on your
                                                                  8                 Form W-2 (PDF). However, they are included as wages subject to
                                                                  9                 social security, Medicare, and federal unemployment taxes.
                                                                 10   Topic 424 - 401(k) Plans, http://www.irs.gov/taxtopics/tc424.html, (emphasis added).
                                                                 11   The above information and Instructions to Form W-2 speak clearly enough for themselves.
                                                                 12   Hartford’s feigned ignorance as to the source and nature of Mr. Mazet’s 401(k) contributions
                                                                 13   is simply an attempt to avoid explaining why it failed to require documentation from the
                                                                 14   employer supporting the various and inconsistent earnings statements.
                                                                 15          Hartford asserts that “. . . Mazet’s position is that, because deferred compensation is
RANDOLPH G. BACHRACH




                                                                 16   nothing more than regular salary that he elected to funnel to his 401(k) rather than receiving
                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 17   in his paycheck, it should still be counted as part of his predisability earnings.” (Defts’.
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 18   Response & X-MSJ, 6:17). Plaintiff could not agree more. As well, there is no reasonable,
                                                                 19   legal or contractual basis upon which Hartford is able to dispute Mr. Mazet’s position.
                                                                 20          V.     It is Hartford’s obligation to obtain from the employer credible, reliable
                                                                 21                 documentary verification of pre-disability earnings, including, W-2 wage
                                                                 22                 statements.
                                                                 23          Hartford claims that Mr. Mazet (during the initial claim and on remand) should have
                                                                 24   submitted to Hartford copies of his W-2 wage statements as proof of his actual pre-disability
                                                                 25   earnings. (Defts’. Response & X-MSJ, 4:20). This is a silly argument because Hartford
                                                                 26   never asked (either during the claim or the remand) that Mr. Mazet verify his pre-disability
                                                                 27   earnings. The Plan and Policy contain no requirement that the claimant verify his own wages,
                                                                 28   for any purpose. Rather, the claim file and Hartford’s own claim documents provide to the
                                                                 29   contrary, i.e., it is the employer who must verify the claimant’s wages. This is only logical.
                                                                 30   And that verification must be true, accurate and supported by proper documentation,
                                                                 31   specifically, W-2 wage statements were appropriate, as here.



                                                                                                                      6

                                                                      Case 2:04-cv-00493-FJM         Document 67       Filed 08/31/2007      Page 6 of 27
                                                                  1   Hartford does not cite any provision of the Plan which supports this position and none exists.
                                                                  2   In fact, Hartford makes this argument as a smokescreen to mask its failure and refusal to
                                                                  3   comply with or to enforce its own written forms and instructions directed to the employer on
                                                                  4   this subject. (See, Docket #22, Plaintiff’s SOF/MSJ, Exhibit 3, CF-00540.) It is inexcusable
                                                                  5   that Hartford, even upon remand of this very issue, did not specifically instruct the employer
                                                                  6   to comply with this written request to supply Hartford with supporting copies of Mr. Mazet’s
                                                                  7   W-2 wage statements. This fact speaks volumes regarding Hartford’s intent to ignore the
                                                                  8   facts in order to justify its fiduciary violations both at the time of the original claim, as well
                                                                  9   as, on remand.
                                                                 10          VI.    None of the Policy’s exceptions to pre-disability earnings apply to Mr.
                                                                 11                 Mazet.
                                                                 12          Hartford’s denial letter (on remand) states as the basis for denial:
RANDOLPH G. BACHRACH

                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 13                 Deferred compensation does not qualify as “Monthly Rate of
                                                                 14                 Basic Earnings" because your deferred compensation is not your
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 15                 regular monthly pay from your employer. *** . . . we have found
                                                                 16                 that "deferred compensation" is not considered when calculating
                                                                 17                 your Monthly Rate of Basic Earnings.
                                                                 18   Defendants’ Supplement to the Administrative Record, CFsupp-00135.
                                                                 19          Hartford provides no Policy or claim processing guidelines to support this basis for
                                                                 20   denial. Hartford’s basis of denial fails upon examining the Policy language. The Policy lists
                                                                 21   only four exceptions to a claimant’s “regular monthly pay” for purposes of calculating the
                                                                 22   “Monthly Rate of Basic Earnings.” (Id.) Hartford does not state nor argue that any of these
                                                                 23   exceptions apply to Mr. Mazet’s 401(k) “deferred compensation.” In fact, none apply. Thus,
                                                                 24   Hartford’s basis of denial (on remand) is nothing more than a gratuitous invention not
                                                                 25   supported by the Policy. Logic alone dictates that “deferred compensation” remains
                                                                 26   compensation, receipt of which is merely delayed (“deferred”). Hartford’s stated reason to
                                                                 27   deny Mr. Mazet’s remand claim is without any basis in the Policy or Plan. It should be
                                                                 28   rejected by the Court.
                                                                 29   ...


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                                                                      Case 2:04-cv-00493-FJM          Document 67        Filed 08/31/2007      Page 7 of 27
                                                                  1          VII.   Numerous other arguments in support of Hartford’s Response to MSJ and
                                                                  2                 Cross-motion are not supported by the facts or the record.
                                                                  3          Hartford claims that it “actually overpaid” Mr. Mazet during the “own occupation”
                                                                  4   disability period. (Defts’. Response & X-MSJ, 5:16). There is no reliable evidence to
                                                                  5   support this claim because the employer’s several wage “verifications” (as seen, above) are
                                                                  6   inherently inconsistent and thereby lack substantial credibility.
                                                                  7          Hartford further argues that “this Court must affirm Hartford's decisions on
                                                                  8   Mazet's claim unless Hartford made those decisions ‘. . . in a way that conflicts with the
                                                                  9   plain language of the plan, or that is based on clearly erroneous findings of fact.’”
                                                                 10   (Defts’. Response & X-MSJ, 5:23). The evidence proves that Hartford is guilty of each of the
                                                                 11   above. First, Hartford’s decisions directly conflict with the Plan because there is no provision
                                                                 12   in the Policy which supports Hartford’s argument that “deferred compensation” should not be
RANDOLPH G. BACHRACH

                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 13   counted with the total compensation received by the claimant in determining pre-disability
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 14   earnings. Second, Hartford’s decisions are based on clearly erroneous facts because it relied
                                                                 15   upon unreliable and inconsistent wage statements provided by the employer without
                                                                 16   supporting documentation, as was required in writing, by Hartford’s claim forms.
                                                                 17          Hartford further argues that “the W-2 forms are not part of the administrative
                                                                 18   record because Mazet did not submit them to Hartford for its consideration.” (Defts’.
                                                                 19   Response & X-MSJ, 6:27). This is a spurious argument wholly unsupported by the facts.
                                                                 20   Because Mr. Mazet submitted his W-2 statements to Defendants and to the Court prior to the
                                                                 21   remand Order, and, prior to Hartford’s claim processing on remand, Hartford’s argument is
                                                                 22   patently disingenuous. Hartford’s argument with respect to submission ofMr. Mazet’s W-2
                                                                 23   wage statements should be rejected for another obvious reason — it is false, on its face. A
                                                                 24   plain reading of the denial letter (see, Defendants’ Supplement to the Administrative Record,
                                                                 25   CFsupp-00135) reveals that it openly refers to the W-2 statements. It is difficult to imagine
                                                                 26   how it would be possible to not have reviewed these documents and still be able to refer to
                                                                 27   them as a basis for denial. In any event, even if it is technically true that the W-2 statements


                                                                                                                      8

                                                                      Case 2:04-cv-00493-FJM         Document 67       Filed 08/31/2007     Page 8 of 27
                                                                  1   were not formally submitted on remand, the fact that Hartford referred to them in its denial
                                                                  2   letter constitutes a waiver of any objection to these documents.
                                                                  3          Hartford further claims that Mr. Mazet failed to exhaust his administrative remedies on
                                                                  4   remand. (Defts’. Response & X-MSJ, 7:2). Hartford claims that Mr. Mazet never before
                                                                  5   asserted that his 401(k) “deferred compensation” was from his salary (i.e., voluntary
                                                                  6   contributions from his salary to his retirement plan). Hartford misstates the failure to exhaust
                                                                  7   rule, which applies to administrative remedies, not, individual factual arguments made in
                                                                  8   support of litigation claims. Hartford provides no authority to the contrary, as this would be a
                                                                  9   breathtaking expansion of the law relating ERISA exhaustion. In any event, the W-2
                                                                 10   statements are self-evident and dispositive on this point. As the I.R.S. Instructions (to Form
                                                                 11   W-2) indicate (supra), Mr. Mazet’s “deferred compensation” is, by definition, a voluntary
RANDOLPH G. BACHRACH




                                                                 12   contribution from his regular salary. Thus, they are included in total predisability earnings.
                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 13          Hartford also argues that “Halliburton, has taken the position that [Mr. Mazet’s
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 14   “deferred compensation to 401(k)] is not part of his basic rate of monthly earnings.”
                                                                 15   (Defts’. Response & X-MSJ, 7:20). This is false and unsupported by the record. Hartford
                                                                 16   makes this claim based solely on the fact that the employer failed to include Mr. Mazet’s
                                                                 17   401(k) contributions in either of the wage statements provided to Hartford. And, that is the
                                                                 18   fault of Hartford in not enforcing its own written claim processing requirements to provide
                                                                 19   documentary support for the wage statement. From the record, it would be an equally
                                                                 20   reasonable assumption that the employer has no opinion on the subject (since this is
                                                                 21   essentially a Policy interpretation matter) and/or simply made a mistake (e.g., a computer
                                                                 22   error) in its research of Mr. Mazet’s pre-disability earnings.
                                                                 23          Hartford also objects (not surprisingly) to Mr. Mazet’s request to revisit the Court’s
                                                                 24   initial grant of summary judgment to Defendants. (Defts’. Response & X-MSJ, 9:10).
                                                                 25   Hartford bases its objection upon the purported “new earnings information supplied by
                                                                 26   Halliburton.” (Defts’. Response & X-MSJ, 10:16). Yet, the “earnings” statements supplied
                                                                 27   by the employer (both “new” and “old”) are facially unreliable and lack substantial credibility

                                                                                                                      9

                                                                      Case 2:04-cv-00493-FJM         Document 67       Filed 08/31/2007     Page 9 of 27
                                                                  1   by reason of their inherent inconsistencies. Thus, Hartford’s objection lacks substantial
                                                                  2   support in the evidence. On the other hand, Plaintiff’s request is well founded in light of
                                                                  3   recent case law confirming the rule in Jebian (supra) which held that a de novo review should
                                                                  4   apply where the plan administrator has failed to exercise discretion (e.g., as here, by failing to
                                                                  5   respond to the claimant’s appeal, ever.)1
                                                                  6          VIII. Conclusion.
                                                                  7          Ninth Circuit case law (Abatie, supra) decided since the original decision of the Court
                                                                  8   granting judgment to Defendants should be interpreted as resolving any conflict that may
                                                                  9   have existed between Jebian (supra) and Gatti (supra) with respect to the appropriate standard
                                                                 10   of review where, as here, the plan administrator has failed to exercise discretion. Based on
                                                                 11   existing case law at the time of the Court’s initial ruling, this Court applied a deferential
RANDOLPH G. BACHRACH




                                                                 12   standard of review. According to Abatie, the appropriate standard of review now in this case
                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 13   is de novo. Accordingly, the Court should apply a consistent review as to the entire case,
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 14   including, a reconsideration of the original grant of judgment to Defendants.
                                                                 15          With respect to the remand decision, the evidence that Hartford’s decision was both
                                                                 16   incorrect and an abuse of discretion is overwhelming. The lack of reliability and credibility
                                                                 17   with respect to the employer’s various and inconsistent wage statements is apparent on its
                                                                 18   face. And, the record shows that Hartford actively avoided seeking any supporting
                                                                 19   documentation, including, W-2 wage statements, even though it had requested such
                                                                 20   documentation from the employer at the time of the initial claim. Thus, based on the
                                                                 21   overwhelming evidence that Mr. Mazet’s voluntary 401(k) contributions were made from
                                                                 22   what would otherwise have been his taxable wages, such amounts should have been included



                                                                                1
                                                                                   Hartford makes a back-up (alternative) argument asking that the Court remand
                                                                        the entire case in the event of (and before) revisiting the initial judgment. (Defts’.
                                                                        Response & X-MSJ, 10:19). This argument is based on a false premise that the prior
                                                                        “labor market survey” is outdated. This is not true because the issue to be decided still
                                                                        involves the period of time encompassed by the initial claim. Hence, the existing wage
                                                                        data initially obtained is sufficient for Hartford’s purposes and remand is unnecessary.

                                                                                                                       10

                                                                      Case 2:04-cv-00493-FJM         Document 67        Filed 08/31/2007      Page 10 of 27
                                                                  1   as pre-disability earnings under the Policy, and Plaintiff is entitled to entry of judgment on the
                                                                  2   remand issue.
                                                                  3          Finally, if the Court determines that de novo review is appropriate to the remand issue,
                                                                  4   the parties should be afforded an opportunity to supplementally brief the entire case in light of
                                                                  5   the modified review standard, and Plaintiff so requests.


                                                                  6   DATED: August 31, 2007                              RANDOLPH G. BACHRACH
                                                                  7                                                       Attorney at Law


                                                                  8                                                  By s/Randolph G. Bachrach
                                                                  9                                                    Randolph G. Bachrach
                                                                 10                                                    5103 E. Thomas Road
                                                                 11                                                    Phoenix, Arizona 85018
                                                                 12                                                    Attorney for Plaintiff
RANDOLPH G. BACHRACH

                       PHOENIX, ARIZONA 85018 S (602) 852-9540




                                                                 13   I hereby certify that on August 31, 2007
                                                                 14   I electronically transmitted the attached
                               5103 E. THOMAS ROAD
                                ATTORNEY AT LAW




                                                                 15   document to the Clerk's Office using the
                                                                 16   CM/ECF System for filing and transmittal
                                                                 17   of a Notice of Electronic Filing to the
                                                                 18   following CM/ECF registrants:

                                                                 19    Thomas Klinkel
                                                                 20    Scott Bennett
                                                                 21    LEWIS & ROCA, LLP
                                                                 22    40 N. Central Ave.
                                                                 23    Phoenix, Arizona 85004-3329
                                                                 24    Attorneys for Defendants



                                                                 25     s/Randolph G. Bachrach




                                                                                                                     11

                                                                      Case 2:04-cv-00493-FJM         Document 67      Filed 08/31/2007      Page 11 of 27
                         EXHIBIT 1
Case 2:04-cv-00493-FJM   Document 67   Filed 08/31/2007   Page 12 of 27
   a Control number                                  Void    For Official Use Only
                                 22222                       OMB No. 1545-0008
   b Employer identification number                                                     1   Wages, tips, other compensation          2   Federal income tax withheld


   c Employer’s name, address, and ZIP code                                             3   Social security wages                    4   Social security tax withheld


                                                                                        5   Medicare wages and tips                  6   Medicare tax withheld


                                                                                        7   Social security tips                     8   Allocated tips


   d Employee’s social security number                                                  9   Advance EIC payment                     10   Dependent care benefits


   e Employee’s name (first, middle initial, last)                                     11   Nonqualified plans                      12   Benefits included in box 1


                                                                                       13   See instrs. for box 13                  14   Other




                                                                                      15 Statutory         Deceased       Pension         Legal           Deferred
                                                                                         employee                         plan            rep.            compensation
   f Employee’s address and ZIP code
 16 State     Employer’s state I.D. no.        17 State wages, tips, etc.   18 State income tax      19 Locality name 20 Local wages, tips, etc.   21 Local income tax




       W-2          Wage and Tax
                                             1999
Form




                                                                                                           Department of the Treasury—Internal Revenue Service
                    Statement                                                                                         For Privacy Act and Paperwork Reduction
                                                                                                                          Act Notice, see separate instructions.
Copy A For Social Security Administration—Send this entire
page with Form W-3 to the Social Security Administration;                               Cat. No. 10134D
photocopies are not acceptable.


Do NOT Cut, Staple, or Separate Forms on This Page — Do NOT Cut, Staple, or Separate Forms on This Page




         Case 2:04-cv-00493-FJM                                Document 67                        Filed 08/31/2007                       Page 13 of 27
Instructions         (Also see Notice to Employee on back of Copy B)        G—Elective and nonelective deferrals to a section 457(b) deferred
Box 1. Enter this amount on the wages line of your tax return.              compensation plan
Box 2. Enter this amount on the Federal income tax withheld line of         H—Elective deferrals to a section 501(c)(18)(D) tax-exempt
your tax return.                                                            organization plan (see “Adjusted Gross Income” in Form 1040
                                                                            instructions for how to deduct)
Box 8. This amount is not included in boxes 1, 3, 5, or 7. For
information on how to report tips on your tax return, see your Form         J—Nontaxable sick pay (not includible as income)
1040 instructions.                                                          K—20% excise tax on excess golden parachute payments (see
Box 9. Enter this amount on the advance earned income credit                “Total Tax” in Form 1040 instructions)
payments line of your Form 1040 or 1040A.                                   L—Substantiated employee business expense reimbursements
Box 10. This amount is the total dependent care benefits your               (nontaxable)
employer paid to you or incurred on your behalf (including amounts          M—Uncollected social security or RRTA tax on cost of group-term
from a section 125 (cafeteria) plan). Any amount over $5,000 also is        life insurance coverage over $50,000 (former employees only) (see
included in box 1. You must complete Schedule 2 (Form 1040A) or             “Total Tax” in Form 1040 instructions)
Form 2441, Child and Dependent Care Expenses, to compute any                N—Uncollected Medicare tax on cost of group-term life insurance
taxable and nontaxable amounts.                                             coverage over $50,000 (former employees only) (see “Total Tax” in
Box 11. This amount is (a) reported in box 1 if it is a distribution        Form 1040 instructions)
made to you from a nonqualified deferred compensation or section            P—Excludable moving expense reimbursements paid directly to
457 plan or (b) included in box 3 and/or 5 if it is a prior year deferral   employee (not included in box 1)
under a nonqualified or section 457 plan that became taxable for            Q—Military employee basic housing, subsistence, and combat zone
social security and Medicare taxes this year because there is no            compensation (use this amount if you qualify for EIC)
longer a substantial risk of forfeiture of your right to the deferred       R—Employer contributions to your medical savings account (MSA)
amount.                                                                     (see Form 8853, Medical Savings Accounts and Long-Term Care
Box 12. This amount is the taxable fringe benefits included in box 1.       Insurance Contracts)
You may be able to deduct expenses that are related to fringe               S—Employee salary reduction contributions to a section 408(p)
benefits; see the Form 1040 instructions.                                   SIMPLE (not included in box 1)
Box 13. The following list explains the codes shown in box 13. You          T—Adoption benefits (not included in box 1). You must complete
may need this information to complete your tax return.                      Form 8839, Qualified Adoption Expenses, to compute any taxable
Note: If a year follows code D, E, F, G, H, or S, you made a                and nontaxable amounts.
make-up pension contribution for a prior year(s) when you were in           Box 15. If the “Pension plan” box is checked, special limits may
military service. To figure whether you made excess deferrals,              apply to the amount of traditional IRA contributions you may deduct.
consider these amounts for the year shown, not the current year. If         If the “Deferred compensation” box is checked, the elective deferrals
no year is shown, the contributions are for the current year.               in box 13 (codes D, E, F, G, H, and S) (for all employers, and for all
A—Uncollected social security or RRTA tax on tips (Include this tax         such plans to which you belong) are generally limited to $10,000.
on Form 1040. See “Total Tax” in Form 1040 instructions.)                   Elective deferrals for section 403(b) contracts are limited to $10,000
B—Uncollected Medicare tax on tips (Include this tax on Form 1040.          ($13,000 in some cases; see Pub. 571). The limit for section 457(b)
See “Total Tax” in Form 1040 instructions.)                                 plans is $8,000. Amounts over these limits must be included in
C—Cost of group-term life insurance over $50,000 (included in               income. See “Wages, Salaries, Tips, etc.” in the Form 1040
box 1)                                                                      instructions.
D—Elective deferrals to a section 401(k) cash or deferred                   Note: Keep Copy C of Form W-2 for at least 3 years after the due
arrangement. Also includes deferrals under a SIMPLE retirement              date for filing your income tax return. However, to help protect your
account that is part of a section 401(k) arrangement.                       social security benefits, keep Copy C until you begin receiving
E—Elective deferrals under a section 403(b) salary reduction                social security benefits, just in case there is a question about your
agreement                                                                   work record and/or earnings in a particular year. SSA suggests you
                                                                            confirm your work record with them from time to time.
F—Elective deferrals to a section 408(k)(6) salary reduction SEP




      Case 2:04-cv-00493-FJM                             Document 67              Filed 08/31/2007                  Page 14 of 27
Employers, Please Note—
Specific information needed to complete    Due dates. Furnish Copies B, C, and 2
Form W-2 is given in a separate booklet    to the employee generally by January
titled 1999 Instructions for Forms W-2     31, 2000.
and W-3. You can order those
                                             File Copy A with the SSA generally by
instructions and additional forms by
                                           February 29, 2000. Send all Copies A
calling 1-800-TAX-FORM
                                           with Form W-3, Transmittal of Wage
(1-800-829-3676). You can also get
                                           and Tax Statements. However, the due
forms and instructions from the IRS’s
                                           date if you file electronically (not by
Internet Web Site at
                                           magnetic media) is March 31, 2000.
www.irs.ustreas.gov.
Caution: Because the SSA processes
paper forms by machines, you cannot
file with the SSA Forms W-2 and W-3
that you print from the IRS’s Internet
Web Site.




     Case 2:04-cv-00493-FJM      Document 67   Filed 08/31/2007   Page 15 of 27
1999                                                                                                           Department of the Treasury
                                                                                                               Internal Revenue Service


Instructions for Forms W-2
and W-3
Wage and Tax Statement and
Transmittal of Wage and Tax Statements
Section references are to the Internal Revenue Code unless otherwise noted.

Contents                                                           Page       about reporting on these forms, call 304-263-8700. If you have
Changes To Note . . . . . . . . . . . . . . . . .        .   .   .  .  1      questions about magnetic media filing of Forms W-2, contact the
                                                                              Social Security Administration (SSA). See Magnetic media
Need Help? . . . . . . . . . . . . . . . . . . . . .     .   .   . .   1      reporting on page 2.
Substitute Forms     . . . . . . . . . . . . . . . . .   .   .   . .   1
                                                                              Help for people with disabilities. Telephone help is available
How To Get Forms and Publications . . . . . . .          .   .   . .   1      using TTY/TDD equipment. If you have questions about
Earned Income Credit (EIC) Notification . . . . .        .   .   . .   2      reporting on information returns—Forms 1096, 1098, 1099,
General Instructions for Forms W-2 and W-3 . .           .   .   . .   2      5498, W-2, W-2G, and W-3, you may call 304-267-3367. For
                                                                              other tax information, please call 1-800-829-4059.
Special Reporting Situations for Form W-2 . . .          .   .   . .   3
                                                                              Bulletin board services. Using a personal computer and a
Penalties . . . . . . . . . . . . . . . . . . . . . .    .   .   . .   6      modem, you can get information from either of two electronic
Specific Instructions for Form W-2 . . . . . . . .       .   .   . .   6      Bulletin Board Systems (BBS)—the SSA–BBS or the IRP–BBS
Specific Instructions for Form W-3 . . . . . . . .       .   .   .    10      (IRS). You can access the SSA–BBS by dialing 410-965-1133
                                                                              or the IRP–BBS (IRS) by dialing 304-264-7070.
Privacy Act and Paperwork Reduction Act Notice               .   .    11
                                                                                  Information available includes magnetic media filing
Reference Guide for Box 13 Codes         . . . . . . .   .   .   .    12      information, some IRS and SSA forms and publications,
Index . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .    12      information on electronic filing, and general topics of interest
                                                                              about information reporting. You can also use the bulletin board
Changes To Note                                                               systems to ask questions about magnetic media or electronic
                                                                              filing programs and reporting on information returns.
Election workers. Report on Form W-2 payments of $600 or
more to election workers for services performed in state, county,             Employment tax publications. Detailed employment tax
and municipal elections. File Form W-2 for payments of less than              information is given in:
                                                                              ● Circular A, Agricultural Employer's Tax Guide (Pub. 51),
$600 paid to election workers if social security and Medicare
taxes were withheld under a section 218 (Social Security Act)                 ● Circular E, Employer's Tax Guide (Pub. 15),
agreement. Do not report election worker payments on Form                     ● Pub. 15-A, Employer's Supplemental Tax Guide, and
1099-MISC.                                                                    ● Pub. 926, Household Employer's Tax Guide.

Extended due date for electronic filers. If you file your 1999
Forms W-2 with the SSA electronically (not by magnetic media),                Substitute Forms
the due date is extended to March 31, 2000. For information on                If you are not using the official IRS form to furnish Form W-2 to
how to file electronically, call the SSA at 1-800-772-6270.                   employees or to file with the SSA, you may use an acceptable
Separate fringe benefit reporting optional. You no longer                     substitute form that complies with the rules in Pub. 1141,
need to separately report taxable fringe benefits that are shown              General Rules and Specifications for Private Printing of Forms
in box 1 of Form W-2, except for the annual lease value of a                  W-2 and W-3. Pub. 1141, which is revised annually, is a revenue
vehicle provided to your employee. However, you must report                   procedure that explains the requirements for format and content
the lease value of a vehicle in box 12 or on a separate statement             of substitute Forms W-2 and W-3. Your substitute forms must
to your employee.                                                             comply with the requirements in Pub. 1141.
Incorrect address on employee's Form W-2. Employers may
reissue a Form W-2 to the employee by placing the Form W-2                    How To Get Forms and Publications
with an incorrect employee address in an envelope with the                    Personal computer. Access the IRS's Internet web site at
correct address for mailing to the employee. See Employee's                   www.irs.ustreas.gov to do the following:
incorrect address on Form W-2 on page 3 for details and other                 ● Download forms, instructions, and publications.
options.                                                                      ● See answers to frequently asked tax questions.
Optional reporting for USERRA makeup amounts.                                 ● Search publications on-line by topic or keyword.
Employers may report certain makeup contributions by an                       ● Send us comments or request help via e-mail.
employee to a pension plan under the Uniformed Services                       ● Sign up to receive hot tax issues and news by e-mail from the
Employment and Reemployment Rights Act of 1994 (USERRA)                       IRS Digital Dispatch.
by providing a separate statement to the employee instead of
by entering them in box 13 of Form W-2. See USERRA makeup                       You can also reach us using:
amounts to a pension plan on page 6 for details.                              ● Telnet at iris.irs.ustreas.gov
                                                                              ● File Transfer Protocol at ftp.irs.ustreas.gov
Need Help?                                                                    ● Direct Dial (by modem) at 703-321-8020.

Information reporting call site. The IRS operates a centralized               CD-ROM. Order Pub. 1796, Federal Tax Products on CD-ROM,
call site to answer questions about reporting on Forms W-2,                   and get:
W-3, 1099, and other information returns. If you have questions               ● Current year forms, instructions, and publications.



                                                                     Cat. No. 12964T
             Case 2:04-cv-00493-FJM                Document 67                         Filed 08/31/2007        Page 16 of 27
●  Prior year forms and instructions.                                 form. You must request the extension before the due date of
●  Popular forms that may be filled in electronically, printed out    Forms W-2 for your request to be considered. If approved, you
for submission, and saved for recordkeeping.                          will have an additional 30 days to file. See Form 8809 for more
   Visit www.irs.ustreas.gov/cdorders on the Internet to buy          details.
the CD-ROM from the National Technical Information Service            Note: Even if you receive an extension to file Form W-2, you
(NTIS) for $13 (plus a $5 handling fee) and save 35%, or call         must still furnish Form W-2 to your employees by January 31,
1-877-CDFORMS (1-877-233-6767) toll-free to buy the CD-ROM            2000. But see Extension to furnish Forms W-2 to employees
for $20 (plus a $5 handling fee). (Prices subject to change.)         on page 3.
By phone and in person. You can order forms and publications          Where to file. File Copy A of Form W-2 with the entire page
24 hours a day, 7 days a week, by calling 1-800-TAX-FORM              of Form W-3 at the following address:
(1-800-829-3676). You can also get most forms and publications            Social Security Administration
at your local IRS office.                                                 Data Operations Center
                                                                          1150 E. Mountain Dr.
Earned Income Credit (EIC) Notification                                   Wilkes-Barre, PA 18769-0001
You must notify employees who have no income tax withheld             Note: If you use “Certified Mail” to file, change the ZIP code to
that they may be eligible for an income tax refund because of the     “18769-0002.” If you use an IRS approved private delivery
EIC. You can do this by using the official IRS Form W-2 that          service, add “ATTN: W-2 Process, 1150 E. Mountain Dr.” to the
contains an EIC notice on the back of Copy B or a substitute          address and change the ZIP code to “18702–7997”. See
Form W-2 with the same statement. If you use a substitute Form        Circular E (Pub. 15) for a list of IRS approved private delivery
W-2 that does not contain the EIC notice, you are not required        services.
to furnish Form W-2, or you do not furnish a timely Form W-2 to       Reminder: Do not send cash, checks, stamps, etc. with the
your employee, you must give your employee Notice 797,                Forms W-2 and W-3 that you submit to the SSA. Remittances
Possible Federal Tax Refund Due to the Earned Income Credit           for employment taxes should be sent to the IRS.
(EIC), or your own statement that contains the same wording.              Send Copy 1 of Form W-2 to your state, city, or local tax
For more information, see section 10 in Circular E (Pub. 15).         department. For more information concerning Copy 1, contact
                                                                      your state, city, or local tax department.
General Instructions for Forms W-2                                    Shipping and mailing. If you file more than one type of
and W-3                                                               employment tax form, please group Forms W-2 of the same
                                                                      type, with a separate Form W-3 for each type, and send them
Who must file Form W-2. Employers must file Form W-2 for              in separate groups. See the specific instructions for box b of
wages paid to each employee from whom:                                Form W-3.
● Income, social security, or Medicare taxes were withheld or
                                                                          Please do not staple or tape Form W-3 to the related
● Income tax would have been withheld if the employee had
                                                                      Forms W-2 or Forms W-2 to each other. These forms are
claimed no more than one withholding allowance or had not             machine read. Staple holes or tears interfere with machine
claimed exemption from withholding on Form W-4, Employee's            reading.
Withholding Allowance Certificate.                                        If you have a large number of Forms W-2 to send with one
   Also, every employer engaged in a trade or business who            Form W-3, you may send them in separate packages. Show
pays remuneration for services performed by an employee,              your name and EIN on each package. Number them in order
including noncash payments, must furnish a Form W-2 to each           (1 of 4, 2 of 4, etc.) and place Form W-3 in package 1. Show
employee even if the employee is related to the employer.             the number of packages at the bottom of Form W-3 below the
   If you are required to file 250 or more Forms W-2, see             title. If you mail them, you must send them First-Class.
Magnetic media reporting below.                                       Note: Extra postage may be necessary if the package you send
Who must file Form W-3. Anyone required to file Form W-2              contains more than a few pages or if the envelope is larger than
must file Form W-3, Transmittal of Wage and Tax Statements,           letter size.
with Copy A of Forms W-2. Make a copy of Form W-3 and keep            Magnetic media reporting. If you are required to file 250 or
it with Copy D (For Employer) of Forms W-2 for your records.          more Forms W-2, you must file them on magnetic media (or
Be sure to use Form W-3 for the correct year.                         electronically) unless the IRS granted you a waiver. You may
    Household employers, even those with only one household           be charged a penalty if you fail to file on magnetic media (or
employee, must file Form W-3 with Form W-2. On Form W-3               electronically) when required.
mark the “Hshld. emp.” checkbox in box b.                             Note: You are encouraged to file on magnetic media (or
    A transmitter or sender (including a service bureau, paying       electronically) even though you are filing fewer than 250 Forms
agent, or disbursing agent) may sign Form W-3 for the employer        W-2.
or payer only if the sender:                                              You may request a waiver on Form 8508, Request for Waiver
      1. Is authorized to sign by an agency agreement (either oral,   From Filing Information Returns on Magnetic Media. Submit
written, or implied) that is valid under state law and                Form 8508 to the IRS at least 45 days before the due date of
      2. Writes “For (name of payer)” next to the signature.          Form W-2. See Form 8508 for filing information.
    If an authorized sender signs for the payer, the payer is still        If you are filing Forms W-2 on magnetic media, you will
responsible for filing, when due, a correct and complete Form         need Form 6559, Transmitter Report and Summary of Magnetic
W-3 and related Forms W-2, and is subject to any penalties that       Media, and you may also need Form 6559-A, Continuation
result from not complying with these requirements. Be sure the        Sheet for Form 6559. Do not use Form W-3.
payer's name and employer identification number (EIN) on              Note: If you file on magnetic media (or electronically), do not
Forms W-2 and W-3 are the same as those used on the Form              file the same returns on paper.
941, 943, CT-1, or Schedule H (Form 1040) filed by or for the             Magnetic media reporting specifications for Form W-2 are in
payer.                                                                the SSA's Pub. No. 42-007 (TIB-4), Magnetic Media Reporting,
When to file. File Copy A of Form W-2 with the entire page of         and Pub. No. ICN (MMREF-1), Magnetic Media Reporting and
Form W-3 by February 29, 2000. You may owe a penalty for              Electronic Filing. They can be downloaded from the SSA's
each Form W-2 you file late. If you terminate your business, see      bulletin boards using a computer and modem by dialing
Terminating a business on page 5.                                     410-965-1133 or 410-965-8450 (On-Line Wage Reporting
                                                                      Bulletin Board). You can also get magnetic media (or electronic)
    Extension to file. You may request an extension of time to        specifications by contacting any Social Security Magnetic Media
file Form W-2 by sending Form 8809, Request for Extension of          Coordinator. Call 1-800-772-6270 for the phone number of the
Time To File Information Returns, to the address shown on that        coordinator in your area. You may also write to:

Page 2
             Case 2:04-cv-00493-FJM                 Document 67             Filed 08/31/2007           Page 17 of 27
   Social Security Administration                                      Agent reporting. Generally, an agent that has an approved
   Attn: Employee Reporting Services Center                            Form(s) 2678, Employer Appointment of Agent, should enter his
   Room 3-B-10 NB, Metro West                                          or her name as the employer in box c of Form W-2, and file one
   300 North Greene Street                                             Form W-2. However, if the agent (1) is acting as an agent for two
   Baltimore, MD 21201                                                 or more employers or is an employer and is acting as an agent
   Reporting instructions for magnetic media filing may differ         for another employer and (2) pays social security wages in
from the paper reporting instructions. For example, magnetic           excess of the wage base to an individual, special reporting for
media filers may enter more than three items in box 13 in one          payments to that individual is needed.
individual's wage report, but paper filers are limited to three           If an agent meets the requirements in items (1) and (2) above,
entries in box 13.                                                     the agent must file separate Forms W-2 reflecting the wages
                                                                       paid by each employer. On each Form W-2 filed as an agent, the
Furnishing Copies B, C, and 2 to employees. Furnish                    agent should enter the following in box c of Form W-2:
Copies B, C, and 2 of Form W-2 to your employees, generally,
by January 31, 2000. You will meet the “furnish” requirement if             (Name of agent)
the form is properly addressed and mailed on or before the due              Agent for (name of employer)
date.                                                                       Address of agent.
   If employment ends before December 31, 1999, you may give              Each Form W-2 should reflect the EIN of the agent in box b.
copies at any time after employment ends, but no later than            In addition, the employer's EIN should be shown in box h of
January 31, 2000. If an employee asks for Form W-2, give him           Form W-3. Get Pub. 1271 (Rev. Proc. 70-6) for procedures to
or her the completed copies within 30 days of the request or           be followed in applying to be an agent.
within 30 days of the final wage payment, whichever is later.          Alien residence status change. If your employee is given a
However, see Terminating a business on page 5.                         new social security card following an adjustment to his or her
   You may give Forms W-2 to employees on IRS official forms           alien residence status that shows a different name or SSN,
or on acceptable substitute forms (see Substitute Forms on             correct your records for 1999 and show the new information on
page 1). Be sure the Forms W-2 you provide to employees                the 1999 Form W-2. If you filed Form W-2 for the same
are clear and legible and comply with the requirements in              employee in prior years under the old name and SSN, file Form
Pub. 1141.                                                             W-2c, Corrected Wage and Tax Statement, to correct the name
   Extension to furnish Forms W-2 to employees. You may                and number. (See Corrections below.)
request an extension of time to provide Forms W-2 to employees            Use a separate Form W-2c to correct each prior year. Advise
by sending a letter to:                                                the employee to contact the local SSA office no earlier than 9
   IRS—Martinsburg Computing Center                                    months after you file Form W-2c to be sure his or her records
   Information Reporting Program                                       are updated.
   Attn: Extension of Time Coordinator                                 Clergy and religious workers. For certain members of the
   P.O. Box 1359                                                       clergy and religious workers who are not subject to social
   Martinsburg, WV 25402-1359                                          security tax as employees, boxes 3 and 5 of Form W-2 should
   Mail your letter on or before the due date for furnishing Forms     be left blank. For information on the rules that apply to ministers
W-2 to employees. It must include:                                     and certain other religious workers, see Pub. 517, Social
     1. Your name and address,                                         Security and Other Information for Members of the Clergy and
     2. Your employer identification number,                           Religious Workers, and section 4 (Religious Exemptions) of
     3. Type of return,                                                Pub. 15-A.
     4. Reason for delay,                                              Corrections. Use Form W-2c, Corrected Wage and Tax
     5. A statement that you are requesting an extension to            Statement, to correct errors (such as incorrect name, SSN, or
furnish Forms W-2 to employees, and                                    amount) on a previously filed Form W-2. Send Form W-3c,
     6. Your signature or that of your authorized agent.               Transmittal of Corrected Wage and Tax Statements, with Forms
                                                                       W-2c unless you are only correcting a name or SSN. However,
   Undeliverable Forms W-2. Keep for 4 years any employee              see Employee's incorrect address on Form W-2 below, for
copies of Forms W-2 that you tried to deliver but could not.           information on correcting an employee's address. Use Form
Taxpayer identification numbers. The IRS uses social                   W-3c to correct a previously filed Form W-3.
security numbers (SSNs) to check the payments you report                  If you discover an error on Form W-2 after you issue it to your
against the amounts shown on the employees' tax returns. The           employee but before you send it to the SSA, mark the “Void”
SSA uses SSNs to record employee earnings for future social            box at the top of the form on Copy A. Prepare a new Copy A
security and Medicare benefits. When you prepare Form W-2,             with the correct information, and send it to the SSA. Write
be sure to show the correct SSN for each employee.                     “Corrected” on the new employee's copies (B, C, and 2), and
   Employers use an employer identification number (EIN)               furnish them to the employee. (If the “Void” Form W-2 is on a
(00-0000000). Employees use an SSN (000-00-0000). When                 page with a correct Form W-2, send the entire page to the SSA.
you list a number, please separate the nine digits properly to         The “Void” form will not be processed.)
show the kind of number.                                                  If you are making an adjustment in 1999 to correct social
                                                                       security and Medicare taxes for a prior year, you must file Form
Special Reporting Situations for Form W-2                              941c, Supporting Statement To Correct Information, with your
                                                                       Form 941, Employer's Quarterly Federal Tax Return, or
Adoption benefits. Amounts paid or expenses incurred by an             Form 943, Employer's Annual Tax Return for Agricultural
employer for qualified adoption expenses under an adoption             Employees, in the return period you find the error, and issue the
assistance program are not subject to income tax withholding           employee a Form W-2c for the prior year. If you are correcting
and are not reportable in box 1. However, these amounts                social security or Medicare wages or tips, also file the entire first
(including adoption benefits paid from a section 125 (cafeteria)       page of Forms W-2c with Form W-3c with the SSA to correct the
plan, but not including adoption benefits forfeited from a cafeteria   social security records.
plan) are subject to social security, Medicare, and railroad
retirement taxes and must be reported in boxes 3 and 5. Also,             Employee's incorrect address on Form W-2. If you filed a
the total amount must be reported in box 13 with code T.               Form W-2 with the SSA showing an incorrect address for the
                                                                       employee but all other information on the Form W-2 is correct,
   See Notice 97-9, 1997-1 C.B. 365, for more information on           do not file Form W-2c with the SSA merely to correct the
adoption benefits. Advise your employees to get Pub. 968, Tax          address.
Benefits for Adoption.
                                                                          However, if the address was incorrect on the Form W-2
                                                                       furnished to the employee, you must do one of the following:


                                                                                                                                   Page 3
             Case 2:04-cv-00493-FJM                  Document 67             Filed 08/31/2007             Page 18 of 27
● Issue a new Form W-2 containing all correct information,          reported on Form W-2. However, if you pay a per diem or
including the new address. Indicate “REISSUED STATEMENT”            mileage allowance and the amount paid exceeds the amount
on the new copies. Do not send Copy A to the SSA.                   treated as substantiated under IRS rules, you must report as
● Issue a Form W-2c to the employee showing the correct             wages on Form W-2 the amount in excess of the amount treated
address in box b. Do not send Copy A to the SSA.                    as substantiated. The excess amount is subject to income tax
● Reissue Form W-2 with the incorrect address to the employee       withholding and social security and Medicare taxes. Report the
in an envelope showing the correct address.                         amount treated as substantiated (i.e., the nontaxable portion) in
                                                                    box 13 using code L.
Deceased employee's wages. If an employee dies during the           ● Payments made under a nonaccountable plan are reported
year, you must report the accrued wages, vacation pay, and
other compensation paid after the date of death.                    as wages on Form W-2 and are subject to income tax
                                                                    withholding and social security and Medicare taxes.
   If you made the payment in the same year the employee
died, you must withhold social security and Medicare taxes on          For more information on accountable plans, nonaccountable
the payment and report the payment on the employee's Form           plans, amounts treated as substantiated under a per diem or
W-2 only as social security and Medicare wages to ensure            mileage allowance, the standard mileage rate, the per diem
proper social security and Medicare credit is received.             substantiation method, and the high-low substantiation method,
   On the employee's Form W-2, show the payment as social           see Pub. 463, Travel, Entertainment, Gift, and Car Expenses;
security wages (box 3) and Medicare wages and tips (box 5) and      Pub. 1542, Per Diem Rates; and Circular E (Pub. 15).
the social security and Medicare taxes withheld in boxes 4          Employee's taxes paid by employer. If you paid your
and 6. Do not show the payment in box 1.                            employee's share of social security and Medicare taxes rather
    If you made the payment after the year of death, do not         than deducting them from the employee's wages, you must
report it on Form W-2, and do not withhold social security and      include the amount of the payments as wages, subject to income
Medicare taxes.                                                     tax withholding and social security, Medicare, and Federal
   Whether the payment is made in the year of death or after the    unemployment (FUTA) taxes. This increase in your employee's
year of death, you also must report it in box 3 of Form             wages for your payment of the employee's social security and
1099-MISC, Miscellaneous Income, for the payment to the             Medicare taxes is also subject to employee social security and
estate or beneficiary. Use the name and taxpayer identification     Medicare taxes. This again increases the amount of the
number (TIN) of the payment recipient on Form 1099-MISC.            additional taxes you must pay. The amount to include as wages
   Example. Before Employee A's death on June 15, 1999, A           is determined by using the formula contained in the discussion
was employed by Employer X and received $10,000 in wages            of Employee's Portion of Taxes Paid by Employer in
on which Federal income tax of $1,500 was withheld. When A          Pub. 15-A.
died, X owed A $2,000 in wages and $1,000 in accrued vacation       Note: This does not apply to household and agricultural
pay. The total of $3,000 (less the social security and Medicare     employers. If you pay a household or agricultural employee's
taxes withheld) was paid to A's estate on July 20, 1999. Because    social security and Medicare taxes, you must include these
X made the payment during the year of death, X must withhold        payments in the employee's wages. However, the wage increase
social security and Medicare taxes on the $3,000 payment and        due to the tax payments is not subject to social security,
must complete Form W-2 as follows:                                  Medicare, or FUTA taxes as discussed above.
● Box d – Employee A's SSN                                          Fringe benefits. Include all taxable fringe benefits in box 1 as
● Box e – Employee A's name                                         wages, tips, and other compensation and, if applicable, in
● Box f – Employee A's address                                      boxes 3 and 5 as social security and Medicare wages. Although
● Box 1 – 10000.00 (does not include the $3,000 accrued
                                                                    not required, you may include the total value of fringe benefits
wages and vacation pay)                                             in box 12, or on a separate statement, or on a separate Form
● Box 2 – 1500.00
                                                                    W-2. However, if you provided your employee a vehicle and
                                                                    included 100% of its annual lease value in the employee's
● Box 3 – 13000.00 (includes the $3,000 accrued wages and
                                                                    income, you must separately report this value to the employee
vacation pay)                                                       in box 12 or on a separate statement. The employee can then
● Box 4 – 806.00 (6.2% of the amount in box 3)                      figure the value of any business use of the vehicle and report it
● Box 5 – 13000.00 (includes the $3,000 accrued wages and           on Form 2106, Employee Business Expenses. See Fringe
vacation pay)                                                       Benefits in Pub. 535, Business Expenses.
● Box 6 – 188.50 (1.45% of the amount in box 5)                     Note: If you used the commuting rule or the vehicle
● Box 15 – Mark the “Deceased” box                                  cents-per-mile rule to value the personal use of the vehicle, you
                                                                    cannot include 100% of the value of the use of the vehicle in the
   Employer X also must complete Form 1099-MISC as follows:         employee's income. See Pub. 535.
●  Boxes for: Recipient's name, address, and TIN — The
estate's name, address, and TIN                                     Golden parachute payments. Include these payments in
● Box 3 – 3000.00 (Even though amounts were withheld for
                                                                    boxes 1, 3, and 5. Withhold income, social security, and
                                                                    Medicare taxes as usual and report them in boxes 2, 4, and 6,
social security and Medicare taxes, the gross amount is reported    respectively. Excess parachute payments are also subject to a
here.)                                                              20% excise tax. If the excess payments are considered wages,
   If Employer X made the payment after the year of death, the      withhold the 20% excise tax and include it in box 2 as income
$3,000 would not be subject to social security and Medicare         tax withheld. Also report it in box 13 with code K. For additional
taxes and would not be shown on Form W-2. However, the              information, see sections 280G and 4999.
employer would still file Form 1099-MISC.
                                                                    Government employers. Federal, state, and local agencies
Educational assistance programs. The $5,250 exclusion for           have two options for reporting their employees' wages that are
employer-provided educational assistance applies to courses         subject only to Medicare taxes for part of the year and full social
starting before June 1, 2000. However, the exclusion does not       security and Medicare taxes for part of the year. Option one
apply to graduate courses that started after June 30,1996.          (which the SSA prefers) is to file a single Form W-2 with the
Generally, a course starts on the first regular day of class. See   Medicare-only wages and the social security and Medicare
Pub. 508, Educational Expenses, and Pub. 15-A, for more             wages combined. The Form W-3 must have the “941” box
information. Also see the instructions for box 1 on page 7.         marked in box b.
Employee business expense reimbursements.                              Option two is to file two Forms W-2 and two Forms W-3. File
Reimbursements to employees for business expenses must be           one Form W-2 for wages subject to Medicare tax only. Be sure
reported as follows:                                                to check the “Medicare govt. emp.” box in box b of Form W-3.
● Generally, payments made under an accountable plan are            File the second Form W-2 for wages subject to both social
excluded from the employee's gross income and are not               security and Medicare taxes with the “941” box checked in

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             Case 2:04-cv-00493-FJM                Document 67            Filed 08/31/2007            Page 19 of 27
box b of Form W-3.                                                     retirement wages and taxes. The Form W-3 used to transmit
Group-term life insurance. If you paid for group-term life             these Forms W-2 must have the “CT-1” box checked in box b.
insurance in excess of $50,000 for an employee or a former             Repayments. If an employee repays you for wages received in
employee, you must report the amount determined by using the           error, do not offset the repayments against current year wages
table in section 5 of Pub.15-A in boxes 1, 3, and 5 of Form W-2.       unless the repayments are for amounts received in error in the
Also, show the amount in box 13 with code C. For employees,            current year. Repayments made in the current year, but related
you must withhold social security and Medicare taxes, but not          to a prior year or years, require special tax treatment by
income tax. Former employees must pay the employee part of             employees in some cases. You may advise the employee of the
social security and Medicare taxes on premiums for group-term          total repayments made during the current year and the amount
life insurance over $50,000 on Form 1040. You are not required         (if any) related to prior years. This information will help the
to collect those taxes. However, you must report the uncollected       employee account for such repayments on his or her Federal
social security tax with code M and the uncollected Medicare tax       income tax return.
with code N in box 13 of Form W-2.                                         If the repayment was for a prior year, you must file Form W-2c
Lost Form W-2—reissued statement. If an employee loses a               with the SSA to correct social security and Medicare wages and
Form W-2, write “REISSUED STATEMENT” on the new copy,                  taxes. Do not correct wages in box 1 on Form W-2c for the
but do not send Copy A of the reissued Form W-2 to the                 amount paid in error. Report an adjustment on Form 941 for the
SSA. You may give a reissued Form W-2 to an employee on the            quarter during which the repayment was made to recover the
official IRS form or on an acceptable substitute form (see             social security and Medicare taxes. Instead of making an
Substitute Forms on page 1).                                           adjustment on Form 941, you may file a claim for these taxes
                                                                       using Form 843, Claim for Refund and Request for Abatement.
Medical savings account (MSA). An employer's contribution              You may not make an adjustment for income tax withholding
to an employee's MSA is not subject to income tax withholding,         because the wages were paid in a prior year.
or social security, Medicare, or railroad retirement taxes, if it is   Note: Please tell your employee that the wages paid in error in
reasonable to believe at the time of the payment that the              a prior year remain taxable to the employee for that year. This
contribution will be excludable from the employee's income. If it      is because the employee received and had use of those funds
is not reasonable to believe at the time of payment that the           during that year. The employee is not entitled to file an amended
contribution will be excludable from the employee's income,            return (Form 1040X) to recover the income tax on these wages.
employer contributions are subject to income tax withholding and       Instead, the employee is entitled to a deduction (or a credit, in
social security and Medicare taxes (or railroad retirement tax, if     some cases) for the repaid wages on his or her Form 1040 for
applicable) and must be reported in boxes 1, 3, and 5.                 the year of repayment.
    You must report all employer contributions to an MSA in
box 13 of Form W-2 with Code R. Employer contributions to an           Scholarship and fellowship grants. Give a Form W-2 to each
MSA that are not excludable from the income of the employee            recipient of a scholarship or fellowship grant only if you are
also must be reported in box 1.                                        reporting amounts includible in income under section 117(c)
    An employee's contributions to an MSA are includible in            (relating to payments for teaching, research, or other services
income as wages and are subject to income tax withholding and          required as a condition for receiving the qualified scholarship).
social security and Medicare taxes (or railroad retirement tax, if     (See Pub. 15-A and Pub. 520, Scholarships and Fellowships,
applicable). Employee contributions are deductible, within limits,     for more information.) Such amounts are subject to income tax
on the employee's Form 1040.                                           withholding. However, their taxability for social security and
                                                                       Medicare taxes depends on the nature of the employment and
    See Notice 96-53, 1996-2 C.B. 219 and Pub. 969, Medical            the status of the organization. See Students in section 16 of
Savings Accounts (MSAs), for more information.                         Circular E (Pub. 15).
Moving expenses. For 1998 and later years, Form 4782,                  Sick pay. If you had employees who received sick pay in 1999
Employee Moving Expense Information, was eliminated.                   from an insurance company or other third-party payer and the
Employers are no longer required to provide this form to               third party notified you of the amount of sick pay involved, you
employees. However, employers may continue providing similar           may be required to report the information on the employees'
information to employees in any format they wish if they deem          Forms W-2. See Sick Pay Reporting in Pub. 15-A for specific
it helpful to employees.                                               reporting instructions.
    Report moving expenses as follows:
● Qualified moving expenses an employer pays to a third party
                                                                       SIMPLE retirement account. An employee's salary reduction
                                                                       contributions to a SIMPLE (savings incentive match plan for
on behalf of the employee (e.g., to a moving company) and              employees) retirement account are not subject to income tax
services that an employer furnishes in kind to an employee are         withholding but are subject to social security, Medicare, and
not reported on Form W-2.                                              railroad retirement taxes. Do not include an employee's
● Qualified moving expense reimbursements paid directly to
                                                                       contribution in box 1; but do include it in boxes 3 and 5. An
an employee by an employer are reported only in box 13 with            employee's total contribution also must be included in box 13
code P.                                                                with code D or S.
● Nonqualified moving expense reimbursements are reported
                                                                           An employer's matching or nonelective contribution to an
in box 1. These amounts are subject to income tax withholding          employee's SIMPLE is not subject to income tax withholding or
and social security and Medicare taxes.                                social security, Medicare, or railroad retirement taxes and is not
Railroad employers. Railroad employers must file Form W-2              to be shown on Form W-2.
to report their employees' wages and income tax withholding.               See Notice 98-4, 1998-2 I.R.B. 25, for more information on
Reporting on magnetic media may be required; see Magnetic              SIMPLE retirement accounts.
media reporting on page 2.                                             Successor/predecessor employers. If you buy or sell a
    If an employee is covered by social security and Medicare,         business during the year, see Rev. Proc. 96-60, 1996–2 I.R.B.
complete boxes 3, 4, 5, 6, and 7 on Form W-2 to show the social        399, for information on who must file Forms W-2 and
security and Medicare wages and the amounts withheld for               employment tax returns.
social security and Medicare taxes. The Form W-3 used to
transmit these Forms W-2 must have the “941” box marked in             Terminating a business. If you terminate your business, you
box b.                                                                 must provide Forms W-2 to your employees for the calendar
    You must report the Tier 1 and Tier 2 taxes withheld in            year of termination by the due date of your final Form 941. You
box 14 of Form W-2. Label them “Tier 1 tax” and “Tier 2 tax.”          must also file Forms W-2 with the SSA by the last day of the
Boxes 3, 4, 5, 6, and 7 apply only to covered social security and      month that follows the due date of your final Form 941. However,
Medicare employees and are not to be used to report railroad           if any of your employees are immediately employed by a
                                                                       successor employer, see Rev. Proc. 96-60, 1996-2 C.B. 399.
                                                                       Also, see Rev. Proc. 96-57, 1996-2 C.B. 389, for information on
                                                                                                                                Page 5
             Case 2:04-cv-00493-FJM                  Document 67             Filed 08/31/2007           Page 20 of 27
automatic extensions for furnishing Forms W-2 to employees                2. Either failed to include all the information required on the
and filing Forms W-2 with the SSA.                                  form or included incorrect information, and
USERRA makeup amounts to a pension plan. If an employee                   3. Filed corrections by August 1.
returned to your employment after military service and certain          If you meet all the conditions in 1, 2, and 3, the penalty for
makeup amounts were contributed to a pension plan for prior         filing incorrect Forms W-2 (but not for filing late) will not apply to
years under the Uniformed Services Employment and                   the greater of 10 Forms W-2 or 1/2 of 1% of the total number of
Reemployment Rights Act of 1994 (USERRA), report the prior          Forms W-2 you are required to file for the calendar year.
year contributions separately in box 13. See the Note above             Lower maximum penalties for small businesses. For
Code D on page 9. You also may report certain make-up               purposes of the lower maximum penalties shown in parentheses
amounts in box 14. See the box 14 instructions on page 9.           above, you are a small business if your average annual gross
   Instead of reporting in box 13, you may choose to provide a      receipts for the 3 most recent tax years (or for the period you
separate statement to your employee showing USERRA makeup           were in existence, if shorter) ending before the calendar year in
contributions. The statement must identify the type of plan, the    which the Forms W-2 were due are $5 million or less.
year(s) to which the contributions relate, and the amounts              Intentional disregard of filing requirements. If any failure
contributed.                                                        to file a correct Form W-2 is due to intentional disregard of the
Note: Current year contributions to pension plans continue to       filing or correct information requirements, the penalty is at least
be reported on Form W-2.                                            $100 per Form W-2 with no maximum penalty.
                                                                    Failure to furnish correct payee statements. If you fail to
Penalties                                                           provide correct payee statements (Forms W-2) to your
The following penalties generally apply to the person required to   employees and you cannot show reasonable cause, you may
file Form W-2. The penalties apply to paper filers as well as       be subject to a penalty. The penalty applies if you fail to provide
magnetic media/electronic filers.                                   the statement by January 31, you fail to include all information
Note: Use of a reporting agent or other third-party payroll         required to be shown on the statement, or you include incorrect
service provider does not relieve an employer of the                information on the statement.
responsibility to ensure that Forms W-2 are furnished to                The penalty is $50 per statement, no matter when the correct
employees and filed correctly and on time.                          statement is furnished, with a maximum of $100,000 per year.
                                                                    The penalty is not reduced for furnishing a correct statement by
Failure to file correct information returns by the due date.        August 1.
If you fail to file a correct Form W-2 by the due date and cannot
show reasonable cause, you may be subject to a penalty. The             Exception. An inconsequential error or omission is not
penalty applies if you:                                             considered a failure to include correct information. An
● Fail to file timely,                                              inconsequential error or omission cannot reasonably be
● Fail to include all information required to be shown on
                                                                    expected to prevent or hinder the payee from timely receiving
                                                                    correct information and reporting it on his or her income tax
Form W-2,
                                                                    return or from otherwise putting the statement to its intended
● Include incorrect information on Form W-2,
                                                                    use. Errors and omissions that are never inconsequential are
● File on paper when you were required to file on                   those relating to:
 magnetic media,                                                          1. A dollar amount,
● Report an incorrect TIN,
                                                                          2. A payee's address, and
● Fail to report a TIN, or
                                                                          3. The appropriate form for the information provided
● Fail to file paper Forms W-2 that are machine readable.           (i.e., whether the form is an acceptable substitute for the official
    The amount of the penalty is based on when you file the         IRS form).
correct Form W-2. The penalty is:                                       Intentional disregard of payee statement requirements.
● $15 per Form W-2 if you correctly file within 30 days (by March   If any failure to provide a correct payee statement (Form W-2)
30); maximum penalty $75,000 per year ($25,000 for small            to an employee is due to intentional disregard of the
businesses, defined later).                                         requirements to furnish a correct payee statement, the penalty
● $30 per Form W-2 if you correctly file more than 30 days after    is at least $100 per Form W-2 with no maximum penalty.
the due date but by August 1; maximum penalty $150,000 per          Civil damages for fraudulent filing of Forms W-2. If you
year ($50,000 for small businesses).                                willfully file a fraudulent Form W-2 for payments you claim you
● $50 per Form W-2 if you file after August 1, or you do not file
                                                                    made to another person, that person may be able to sue you for
required Forms W-2; maximum penalty $250,000 per year               damages. You may have to pay $5,000 or more.
($100,000 for small businesses).
    Exceptions. If you meet any of the following exceptions, you
will not be liable for the penalty:
● The penalty will not apply to any failure that you can show was
                                                                    Specific Instructions for Form W-2
due to reasonable cause and not to willful neglect.                 How to complete Form W-2. Form W-2 is a six-part form.
● An inconsequential error or omission is not considered a
                                                                    Please ensure that all copies are legible. Send Copy A to
failure to include correct information. An inconsequential error    the SSA; Copy 1 to the state, city, or local tax department;
or omission does not prevent or hinder the IRS from processing      Copies B, C, and 2 to the employee. Keep Copy D with a copy
the Form W-2, from correlating the information required to be       of Form W-3 for your records.
shown on the form with the information shown on the payee's tax        Type the entries on Form W-2 using black ink. Do not use
return, or from otherwise putting the form to its intended use.     script type, inverted font, italics, or dual case alpha characters.
Errors and omissions that are never inconsequential are those       Copy A is read by machines. Your use of red ink or printing
relating to:                                                        hinders report data entry processing by the SSA. It is important
                                                                    that entries in the boxes do not cross one or more of the vertical
     1. A TIN,                                                      or horizontal lines that separate the boxes. Please do not erase,
     2. A payee's surname, and                                      whiteout, or strike over an entry. Make all dollar entries
     3. Any money amounts.                                          without the dollar sign and comma but with the decimal
    De minimis rule for corrections. Even though you cannot         point (00000.00). Show the cents portion of the money
show reasonable cause, the penalty for failure to file correct      amounts. If a box does not apply, leave it blank.
Forms W-2 will not apply to a certain number of returns if you:        Send the whole Copy A page of Form W-2 with Form W-3
     1. Filed those Forms W-2,                                      to the SSA even if one of the forms is blank or void. Do not
                                                                    staple Forms W-2 together or to Form W-3. Also, if possible,
                                                                    please file Forms W-2 either alphabetically by employees' last
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             Case 2:04-cv-00493-FJM                Document 67            Filed 08/31/2007             Page 21 of 27
names or numerically by employees' SSNs. This will help the                 2. Total noncash payments, including certain fringe benefits.
SSA locate specific forms.                                             See Fringe benefits on page 4 and in Pub. 535 for information.
Calendar year basis. The entries on Form W-2 must be based                  3. Total tips reported by employee to employer (not
on a calendar year. Use Form W-2 for the correct tax year.             allocated tips).
Multiple forms. If necessary, you can issue more than one                   4. Certain employee business expense reimbursements (see
Form W-2 to an employee. For example, you may need to report           Employee business expense reimbursements on page 4).
more than three coded items in box 13 or you may want to report             5. The cost of accident and health insurance premiums for
other compensation on a second form. If you issue a second             2% or more shareholder-employees paid by an S corporation.
Form W-2, complete boxes b, c, d, and e with the same                       6. Taxable benefits from a section 125 (cafeteria) plan (i.e.,
information as on the first Form W-2. Show any items that were         employee chooses cash).
not included on the first Form W-2 in the appropriate boxes.                7. Employee contributions to an MSA.
    Do not report the same Federal tax data to the SSA on more              8. Employer contributions to an MSA if includible in the
than one Copy A.                                                       income of the employee. See Medical savings account
Box a—Control number. You may use this box to identify                 (MSA) on page 5.
individual Forms W-2. You do not have to use this box.                      9. Employer contributions for qualified long-term care
Void. Check this box when an error is made on Form W-2 and             services to the extent that such coverage is provided through
you are voiding it because you are going to complete a new             a flexible spending or similar arrangement.
Form W-2. Be careful not to include any amounts shown on                   10. Group-term life insurance in excess of $50,000. See
Void forms in the totals you enter on Form W-3. See                    Group-term life insurance on page 5.
Corrections on page 3.                                                     11. Unless excludable as explained under an educational
Box b—Employer identification number. Show the EIN                     assistance program (see page 4), payments for non-job-related
assigned to you by the IRS (00-0000000). This should be the            education expenses or for payments under a nonaccountable
same number that you used on your Federal employment tax               plan. See Pub. 508.
returns (Form 941, 943, or CT-1). Do not use a prior owner's               12. The amount includible as wages because you paid your
EIN. If you do not have an EIN when filing Forms W-2, enter            employee's share of taxes; see Employee's taxes paid by
“Applied For” in box b, not your SSN. You can get an EIN by            employer on page 4.
filing Form SS-4, Application for Employer Identification Number.          13. All other compensation, including certain scholarship and
Also see Agent reporting on page 3.                                    fellowship grants (see page 5). Other compensation is amounts
Box c—Employer's name, address, and ZIP code. This entry               that you pay your employee from which Federal income tax is
should be the same as shown on your Form 941 or 943. Also              not withheld. You may show other compensation on a separate
see Agent reporting on page 3.                                         Form W-2. See Multiple forms on page 7.
                                                                           14. Distributions to an employee or former employee from a
Box d—Employee's social security number. Enter the                     nonqualified deferred compensation plan or a section 457 plan.
number shown on the employee's social security card. If the                15. Payments to statutory employees that are subject to social
employee does not have a card, he or she should apply for one          security and Medicare taxes but not subject to Federal income
by completing Form SS-5, Application for a Social Security             tax withholding must be shown in box 1 as other compensation.
Card. If the employee has applied for a card but the number is         See Box 15, Statutory employee, on page 10.
not received in time for filing, enter “Applied For” in box d.
    Ask the employee to inform you of the number and the exact         Box 2—Federal income tax withheld. Show the amount of
way his/her name is printed on the card when it is received.           Federal income tax withheld from the employee's wages for the
Then correct your previous report by filing Form W-2c showing          year (do not reduce by any advance EIC payments made to the
the employee's SSN. Also show the employee's name as shown             employee). Also include the 20% excise tax withheld on excess
on the card. If the employee needs to change his or her name           parachute payments. See Golden parachute payments on
from that shown on the card, the employee should call the SSA          page 4.
at 1-800-772-1213.                                                     Box 3—Social security wages. Show the total wages paid
Boxes e and f—Employee's name and address. Enter the                   (before payroll deductions) subject to employee social security
name as shown on the employee's social security card (first,           tax but not including social security tips and allocated tips.
middle initial, last). If the name does not fit, you may show first    (See Box 7 and Box 8 later.) Generally, noncash payments are
name initial, middle initial, and last name. If the name has           considered wages. Include employee business expense
changed, the employee must get a corrected card from any SSA           reimbursements reported in box 1. If you paid the employee's
office. Use the name on the original card until you see the            share of social security and Medicare taxes rather than
corrected one. Do not show titles or academic degrees, such            deducting them from wages, see Employee's taxes paid by
as “Dr.,” “RN,” or “Esq.,” at the beginning or end of the              employer on page 4. The total of boxes 3 and 7 should not be
employee's name.                                                       more than $72,600 (1999 maximum social security wage base).
     Include in the address the number, street, apt. or suite             Also, include elective deferrals to certain qualified cash or
number, or P.O. Box number if mail is not delivered to a street        deferred compensation arrangements and to retirement
address. For a foreign address, give the information in the            arrangements described in box 13, in codes D, E, F, G, and S,
following order: city, province or state, postal code, and the         even though the deferrals are not includible in box 1. Amounts
name of the country. Do not abbreviate the name of the country.        deferred under a nonqualified or section 457 plan must be
    Third-party payers of sick pay filing third-party sick pay recap   included in boxes 3 and/or 5 as social security and/or Medicare
Forms W-2 and W-3 must enter “Third-Party Sick Pay Recap” in           wages as of the later of when the services giving rise to the
place of the employee's name in box e. See Sick Pay Reporting          deferral are performed or when there is no substantial forfeiture
in Pub. 15-A.                                                          risk of the rights to the deferred amount. Include elective and
                                                                       nonelective deferrals for purposes of section 457 plans.
Box 1—Wages, tips, other compensation. Show the total
wages, tips, and other compensation, before any payroll                   Also include in box 3:
                                                                       ● Cost of group-term life insurance over $50,000 included in
deductions, you paid your employee during the year. Do not
include elective deferrals, except section 501(c)(18)                   box 1. See Group-term life insurance on page 5.
contributions. Include the following:                                  ● Cost of accident and health insurance premiums for 2% or

      1. Total wages, prizes, and awards paid to employees during      more shareholder-employees paid by an S corporation, but only
the year. For example, if the employee worked from December            if not excludable under section 3121(a)(2)(B).
21, 1999, through January 3, 2000, and the wages for that              ● Employee and nonexcludable employer contributions to an
period were paid on January 5, 2000, include those wages on            MSA. See Medical savings account (MSA) on page 5.
the 2000 Form W-2.

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● Employee contributions to a SIMPLE retirement account. See           amounts were no longer subject to a substantial risk of forfeiture.
SIMPLE retirement account on page 5.                                   Do not report in box 11 deferrals that are included in boxes 3
● Adoption benefits. See Adoption benefits on page 3.                  and/or 5 and that are for current year services.
Box 4—Social security tax withheld. Show the total employee            Note: If you made distributions and are also reporting deferrals
social security tax (not your share) withheld, including social        in box 3 and/or 5, do not complete box 11. See Pub. 957,
security tax on tips. Do not reduce this amount by any advance         Reporting Back Pay and Special Wage Payments to the Social
EIC payments made to the employee. For 1999, the amount                Security Administration, and Form SSA-131, Employer Report
should not exceed $4,501.20 ($72,600 × 6.2%). Include only             of Special Wage Payments, for instructions on reporting these
taxes withheld (or paid by you for the employee) for 1999 wages        and other kinds of compensation earned in prior years. However,
and tips. If you paid your employee's share, see Employee's            do not file Form SSA-131 if contributions and distributions occur
taxes paid by employer on page 4.                                      in the same year and the employee will not be age 62 or older
                                                                       by the end of that year.
Box 5—Medicare wages and tips. The wages and tips subject                 The purpose of box 11 is for the SSA to determine if any part
to Medicare tax are the same as those subject to social security       of the amount reported in box 1 or boxes 3 and/or 5 was earned
tax (boxes 3 and 7), except that there is no wage base limit for       in a prior year. The SSA uses this information to verify that they
Medicare tax. Enter the total Medicare wages and tips in box           have properly applied the social security earnings test and paid
5. Be sure to enter tips the employee reported even if you did         the correct amount of benefits.
not have enough employee funds to collect the Medicare tax for            Unlike qualified plans, nonqualified deferred compensation
those tips. See Box 3 on page 7 for payments to report in this         plans do not meet the qualification requirements for tax-favored
box. If you paid your employee's share of taxes, see                   status. Nonqualified plans include those arrangements
Employee's taxes paid by employer on page 4.                           traditionally viewed as deferring the receipt of current
   If you are a Federal, state, or local agency with employees         compensation. Accordingly, welfare benefit plans, stock option
paying only the 1.45% Medicare tax, enter the Medicare wages           plans, and plans providing dismissal pay, termination pay, or
in this box. See Government employers on page 4.                       early retirement pay are not nonqualified plans.
   Example of how to report social security and Medicare                  State and local agencies must separately identify section 457
wages. You paid your employee $140,000 in wages. Enter in              distributions in this box by entering code G followed by a space,
box 3 (social security wages) 72600.00, but enter in box 5             and then the dollar amount. However, if you are reporting a
(Medicare wages and tips) 140000.00. There is no limit on the          distribution from both a nonqualified plan and a section 457 plan,
amount reported in box 5. If the amount of wages paid was              report it as a single amount in this box; do not enter code G.
$72,600 or less, the amounts entered in boxes 3 and 5 would               Report distributions from nonqualified or section 457 plans to
be the same.                                                           beneficiaries of deceased employees on Form 1099-R,
Box 6—Medicare tax withheld. Enter the total employee                  Distributions From Pensions, Annuities, Retirement or
Medicare tax (not your share) withheld. Include only taxes             Profit-Sharing Plans, IRAs, Insurance Contracts, etc., not on
withheld for 1999 wages and tips. Do not reduce this amount by         Form W-2.
any advance EIC payments made to the employee. If you paid                Military employers must report military retirement payments
your employee's share of the taxes, see Employee's taxes paid          on Form 1099-R.
by employer on page 4.
                                                                       Box 12—Benefits included in box 1. Use of this box is
Box 7—Social security tips. Show the amount the employee               optional. You may use it to report taxable fringe benefits that are
reported to you even if you did not have enough employee funds         included in box 1. However, the lease value of a vehicle provided
to collect the social security tax for the tips. The total of          to your employee and reported in box 1 must be reported here
boxes 3 and 7 should not be more than $72,600.00 (the                  or in a separate statement to your employee.
maximum social security wage base for 1999). Report all tips in
box 1 along with wages and other compensation.                         Box 13—Codes. Complete and code this box for all items
                                                                       described below. Do not report in box 13 any items that are not
Box 8—Allocated tips. If you are a large food or beverage              listed as codes A–T. Do not report in box 13 section 414(h)(2)
establishment, show the amount of tips allocated to the                contributions (relating to certain state or local government plans).
employee. (See the Instructions for Form 8027, Employer's              Instead, use box 14 for these items and any other information
Annual Information Return of Tip Income and Allocated Tips.)           you wish to give your employee. For example, union dues and
Do not include this amount in boxes 1, 3, 5, or 7.                     uniform payments may be reported in box 14.
Box 9—Advance EIC payment. Show the total amount paid to               Note: On Copy A (Form W-2), do not enter more than three
the employee as advance earned income credit (EIC) payments.           items in box 13. If more than three items need to be reported
                                                                       in box 13, use a separate Form W-2 to report the additional
Box 10—Dependent care benefits. Show the total amount of               items (but enter no more than three items on each Copy A (Form
dependent care benefits under a dependent care assistance              W-2)). On all other copies of Form W-2 (Copies B, C, etc.), you
program (section 129) paid or incurred by you for your                 may enter more than three items in box 13. See Multiple forms
employee. Include the fair market value of employer-provided           on page 7.
or employer-sponsored day-care facilities and amounts paid or
incurred in a section 125 (cafeteria) plan. Report all amounts            Use the IRS code designated below for the item you are
paid or incurred including those in excess of the $5,000               entering followed by the dollar amount for that item. Even if
exclusion. This may include (a) the fair market value of benefits      only one item is entered, you must use the IRS code designated
provided in kind by the employer; (b) an amount paid directly to       for that item. Enter the code using a capital letter. Leave at least
a day-care facility by the employer or reimbursed to the               one space blank after the code, and enter the dollar amount on
employee to subsidize the benefit; or (c) benefits from the            the same line. Use decimal points but not dollar signs or
pre-tax contributions made by the employee to a section 125            commas. For example, if you are reporting $5,300.00 in elective
dependent care flexible spending account. Include any amounts          deferrals to a section 401(k) plan, the entry would be: D 5300.00
over $5,000 in boxes 1, 3, and 5. For more information, see            (not A 5300.00 even though it is the first or only entry in this
Pubs. 15-A and 535.                                                    box).
                                                                          See the Reference Guide for Box 13 Codes on page 12.
Box 11—Nonqualified plans. Show the amount of                          See the detailed instructions below for each code.
distributions to an employee from a nonqualified plan or a
section 457 plan. Also report distributions in box 1. If you did not      Code A—Uncollected social security or RRTA tax on tips.
make distributions this year, show the amount of deferrals (plus       Show the employee social security or Railroad Retirement Tax
earnings) under a nonqualified or section 457 plan that became         Act (RRTA) tax on all the employee's tips that you could not
taxable for social security and Medicare taxes during the              collect because the employee did not have enough funds from
year (but were for prior year services) because the deferred           which to deduct it. Do not include this amount in box 4.


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   Code B—Uncollected Medicare tax on tips. Show the                   profit-sharing employer contribution are not required to be
employee Medicare tax or RRTA Medicare tax on tips that you            reported on Form W-2, but may be reported in box 14.
could not collect because the employee did not have enough                 Check “Deferred compensation” in box 15.
funds from which to deduct it. Do not include this amount in               Code J—Nontaxable sick pay. Show any sick pay not
box 6.                                                                 includible in income because the employee contributed to the
   Code C—Cost of group-term life insurance over $50,000.              sick pay plan. If you issue a separate Form W-2 for sick pay,
Show the taxable amount of the cost of group-term life insurance       enter “Sick pay” in box 13.
coverage over $50,000 provided to your employee (including a               Code K—20% excise tax on excess golden parachute
former employee). See Group-term life insurance on page 5.             payments. If you made excess “golden parachute” payments
Also include it in boxes 1, 3, and 5.                                  to certain key corporate employees, report the 20% excise tax
   Codes D through H and S. Use these codes to show the                withheld on these payments. If the excess payments are
amount of deferrals made to the plans listed. Do not report            considered wages, also report the 20% excise tax as income tax
amounts for other types of plans. See below for an example of          withheld in box 2.
reporting an elective deferral to a section 401(k) plan.                   Code L—Substantiated employee business expense
   The amount reported as an elective deferral is only the part        reimbursements. Report only the amount treated as
of the employee's salary (or other compensation) that he or she        substantiated, i.e., the nontaxable part. Use this code only if you
did not receive because of the deferral. Only elective deferrals       reimbursed your employee for employee business expenses
should be reported in box 13 for all coded plans, except, when         using a per diem or mileage allowance and the amount you
using code G for section 457(b) plans, include both elective and       reimbursed exceeds the amount treated as substantiated under
nonelective deferrals.                                                 IRS rules. (See Employee business expense reimbursements
   The following are not elective deferrals and may be reported        on page 4.) In box 1, include the part of the reimbursement that
in box 14 but not in box 13:                                           is more than the amount treated as substantiated.
● Nonelective employer contributions made on behalf of an                   Do not include any per diem or mileage allowance
employee.                                                              reimbursements for employee business expenses in box 13 if
● After-tax contributions, such as voluntary contributions to a        the total reimbursement is equal to or less than the amount
pension plan that are deducted from an employee's pay.                 treated as substantiated.
● Required employee contributions.                                         Code M—Uncollected social security or RRTA tax on cost
● Employer matching contributions.                                     of group-term life insurance coverage over $50,000 (for
Note: If any elective deferrals, salary reduction amounts, or          former employees). If you provided your former employees
nonelective contributions to a section 457(b) plan during the year     (including retirees) more than $50,000 of group-term life
are makeup amounts under the Uniformed Services                        insurance coverage for periods during which an employment
Employment and Reemployment Rights Act of 1994                         relationship no longer exists, enter the amount of uncollected
(USERRA) for a prior year, you must enter the prior year               social security or RRTA tax on the coverage in box 13. Also see
contributions separately. You must enter the code, the year, and       Group-term life insurance on page 5.
the amount. For example, elective deferrals to a section 401(k)            Code N—Uncollected Medicare tax on cost of group-term
plan are reported in box 13 as follows: D 1997 2250.00, D 1998         life insurance coverage over $50,000 (for former
1250.00. The 1999 contribution does not require a year                 employees). If you provided your former employees (including
designation; enter it as D 7000.00.                                    retirees) more than $50,000 of group-term life insurance
   Code D—Elective deferrals to a section 401(k) cash or               coverage for periods during which an employment relationship
deferred arrangement. Also show the amount deferred under              no longer exists, enter the amount of uncollected Medicare tax
a SIMPLE retirement account that is part of a section 401(k)           or RRTA Medicare tax on the coverage in box 13. Also see
arrangement.                                                           Group-term life insurance on page 5.
   Code E—Elective deferrals under a section 403(b) salary                 Code P—Excludable moving expense reimbursements
reduction agreement.                                                   paid directly to an employee. Show the total moving expense
                                                                       reimbursements you paid directly to your employee for qualified
   Code F—Elective deferrals under a section 408(k)(6)                 (deductible) moving expenses. See Moving expenses on
salary reduction SEP.                                                   page 5.
   Code G—Elective and nonelective deferrals to a section                  Code Q—Military employee basic housing, subsistence,
457(b) deferred compensation plan for employees of state and           and combat zone compensation. If you are a military
local governments or tax-exempt organizations. Do not report           employer and provide your employee with basic housing,
section 457(f) amounts or amounts deferred under section               subsistence allowances, or combat zone compensation, report
457(b) that are subject to a substantial risk of forfeiture.           it in box 13.
Note: The section 457 dollar limit should be reduced by                    Code R—Employer contributions to a medical savings
deferrals to certain other deferred compensation plans. See            account (MSA). If you make contributions to an MSA for your
section 457(c)(2).                                                     employee, show all employer contributions in box 13 with
   Code H—Elective deferrals to a section 501(c)(18)(D)                code R. See Medical savings account (MSA) on page 5.
tax-exempt organization plan. Be sure to include this amount               Code S—Employee salary reduction contributions to a
in box 1 as wages. The employee will deduct the amount on his          section 408(p) SIMPLE. Show the amount deferred under a
or her Form 1040.                                                      section 408(p) salary reduction SIMPLE retirement account.
   Example of reporting elective deferral to a section 401(k)          However, if the SIMPLE is part of a section 401(k) arrangement,
plan. For 1999, Employee A elected to defer $10,300 to a               use code D. If you are reporting prior year contributions under
section 401(k) plan and made a voluntary after-tax contribution        USERRA, see the Note under Codes D through H and S on
of $600. In addition, the employer, on A's behalf, made a              this page.
qualified nonelective contribution of $1,000 to the plan and a             Code T—Adoption benefits. Show the total amount you paid
nonelective profit-sharing employer contribution of $2,000.            or reimbursed for qualified adoption expenses furnished to your
   The total elective deferral of $10,300 is reported in box 13 with   employee under an adoption assistance program. Also include
code D (D 10300.00). Even though the 1999 limit for elective           adoption benefits paid or reimbursed from the pre-tax
deferrals is $10,000.00, the employer must report the total            contributions made by the employee to a section 125 (cafeteria)
amount of $10,300.00 in box 13. The excess is not reported in          plan. However, do not include adoption benefits forfeited from a
box 1.                                                                 section 125 (cafeteria) plan. Report all amounts including those
   The $600 voluntary after-tax contribution may be reported in        in excess of the $5,000 or $6,000 exclusion.
box 14 (this is optional) but not in box 13. The $1,000
nonelective contribution and the $2,000 nonelective

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Box 14—Other. You may use this box for any other information           the employee's name and the other person or business is acting
you want to give your employee. Please label each item.                on behalf of the employee.
Examples are union dues, uniform payments, health insurance               Representatives are identified by words such as “custodian,”
premiums deducted, nontaxable income, educational assistance           “parent,” or “attorney”; sometimes the employee is identified as
payments, or a member of the clergy's parsonage allowance and          a minor, child, etc. Do not check this box if the address is in care
utilities. In addition, you may enter the following contributions to   of someone other than the employee (e.g., Jane Doe, c/o Shelby
a pension plan: (a) nonelective employer contributions made on         Smith).
behalf of an employee, (b) voluntary after-tax contributions that      ● Deferred compensation. Check this box if the employee has
are deducted from an employee's pay, (c) required employee             made an elective deferral to a section 401(k), 403(b), 408(k)(6),
contributions, and (d) employer matching contributions.                408(p), or 501(c)(18)(D) retirement plan. Also check this box if
   If you are reporting prior year contributions under USERRA          an elective or nonelective deferral was made to a section 457(b)
(see the Note under Codes D through H and S on page 9 and              plan. Also see Codes D through H and S under Box 13 on
USERRA makeup amounts to a pension plan on                             page 9.
page 6), you may report in box 14 makeup amounts for                   Note: Do not check this box for nonqualified deferred
nonelective employer contributions, voluntary after-tax                compensation plans.
contributions, required employee contributions, and employer
matching contributions. Report such amounts separately for             Boxes 16 through 21—State and local income tax
each year.                                                             information. Use these boxes to report state and local income
                                                                       tax information. Enter the two-letter abbreviation of the name
Box 15—Checkboxes. Check the boxes that apply.                         of the state. The employer's state I.D. numbers are assigned
● Statutory employee. Check this box for statutory employees
                                                                       by the individual states. The state and local information boxes
whose earnings are subject to social security and Medicare             can be used to report wages and taxes for two states and two
taxes but not subject to Federal income tax withholding. Do not        localities. Keep each state's and locality's information separated
check this box for common-law employees. The following four            by the broken line. If you need to report information for more
categories of workers who are independent contractors under            than two states or localities, prepare a second Form W-2. See
the common-law rules are treated by statute as employees. They         Multiple forms on page 7.
are called statutory employees.
      1. A driver who distributes beverages (other than milk), or
meat, vegetable, fruit, or bakery products; or who picks up and        Specific Instructions for Form W-3
delivers laundry or dry cleaning, if the driver is your agent or is
paid on commission.                                                    How to complete form W-3. The instructions under How to
                                                                       complete Form W-2 earlier generally apply to Form W-3 also.
      2. A full-time life insurance sales agent whose principal
                                                                       See those instructions. Please type entries if possible.
business activity is selling life insurance or annuity contracts, or
both, primarily for one life insurance company.                        Note: Amounts reported on related employment tax forms (e.g.,
      3. An individual who works at home on materials or goods
                                                                       W-2, 941, or 943) should agree with the amounts reported on
that you supply and that must be returned to you or to a person
                                                                       Form W-3. If there are differences, you may be contacted by the
you name, if you also furnish specifications for the work to be
                                                                       IRS and SSA. You should retain your reconciliation for future
done.
                                                                       reference. See Reconciling Forms W-2, W-3, 941, and 943 on
                                                                       page 11.
      4. A full-time traveling or city salesperson who works on your
behalf and turns in orders to you from wholesalers, retailers,         Box a—Control number. This is an optional box that you may
contractors, or operators of hotels, restaurants, or other similar     use for numbering the whole transmittal.
establishments. The goods sold must be merchandise for resale          Box b—Kind of Payer. Mark the checkbox that applies to you.
or supplies for use in the buyer's business operation. The work        Mark only one box. If you have more than one type of Form
performed for you must be the salesperson's principal business         W-2, send each type with a separate Form W-3.
activity.
                                                                          941. Mark this box if you file Form 941, Employer's Quarterly
   See Pub. 15-A for details on statutory employees and                Federal Tax Return, and no other category applies.
common-law employees.
● Deceased. Check this box if the employee died during 1999.
                                                                          Military. Mark this box if you are a military employer sending
                                                                       Forms W-2 for members of the uniformed services.
See Deceased employee's wages on page 4.
● Pension plan. Check this box if the employee was an active
                                                                          943. Mark this box if you file Form 943, Employer's Annual
                                                                       Tax Return for Agricultural Employees, and you are sending
participant (for any part of the year) in any of the following:        Forms W-2 for agricultural employees. For nonagricultural
      1. A qualified plan described in section 401(a) (including a     employees, send their Forms W-2 with a separate Form W-3.
401(k) plan).                                                             CT-1. Mark this box if you are a railroad employer sending
      2. An annuity plan described in section 403(a).                  Forms W-2 for employees covered under the Railroad
      3. An annuity contract or custodial account described in         Retirement Tax Act (RRTA). Do not show employee RRTA tax
section 403(b).                                                        in boxes 3 through 7. These boxes are ONLY for social security
      4. A simplified employee pension (SEP) plan described in         and Medicare information. If you also have employees who are
section 408(k).                                                        subject to social security and Medicare taxes, send each group's
      5. A SIMPLE retirement account described in section 408(p).      Forms W-2 with a separate Form W-3. Mark the 941 box on the
      6. A trust described in section 501(c)(18).                      Form W-3 used to send the Forms W-2 for employees subject
      7. A plan for Federal, state, or local government employees      to social security and Medicare taxes.
or by an agency or instrumentality thereof (other than a                  Hshld. emp. Mark this box if you are a household employer
section 457 plan).                                                     sending Forms W-2 for household employees.
   See Pub. 1602, General Rules for Individual Retirement                 Medicare government employee. Mark this box if you are
Arrangements Under the Tax Reform Act of 1986, for information         a U.S., state, or local agency filing Forms W-2 for employees
on who qualifies as an active participant. Do not check this box       subject only to the 1.45% Medicare tax. See Government
for contributions made to a nonqualified or section 457 plan.          employers on page 4 for additional information.
   Also check the deferred compensation box. See Deferred              Box c—Total number of Forms W-2. Show the number of
compensation below.                                                    completed individual Forms W-2 you are transmitting with this
● Legal representative. Check this box when the employee's             Form W-3. Do not count Void forms.
name is the only name shown but is shown as a trust account
(e.g., Jane Doe Trust), or another name is shown in addition to        Box d—Establishment number. You may use this box to
                                                                       identify separate establishments in your business. You may file
                                                                       a separate Form W-3, with Forms W-2, for each establishment
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even if they all have the same EIN; or you may use a single            filed with the SSA, we must contact you to resolve the
Form W-3 for all Forms W-2 of the same type.                           discrepancies.
Box e—Employer identification number. If you received a                    To help reduce discrepancies—
preprinted label from the IRS with Pub. 393, Federal                        1. Report bonuses as wages and as social security and
Employment Tax Forms, or Pub. 2184, Alternative Ways to Get            Medicare wages on Forms W-2 and 941/943.
Employment Tax Forms and Instructions, place the label inside               2. Report both social security and Medicare wages and taxes
the brackets in boxes e, f, and g. Make any necessary                  separately on Forms W-2, W-3, and 941/943.
corrections on the label.                                                   3. Report social security taxes on Form W-2 in the box for
   If you are not using a preprinted label, enter the nine-digit       social security tax withheld, not as social security wages.
number assigned to you by the IRS. The number should be the                 4. Report Medicare taxes on Form W-2 in the box for
same as shown on your Form 941, 943, or CT-1 and in the                Medicare tax withheld, not as Medicare wages.
following format: 00-0000000. Do not use a prior owner's EIN.               5. Make sure the social security wage amount for each
See Box h on this page.                                                employee does not exceed the annual social security wage base
   If you do not have an EIN when filing your Form W-3, enter          limit.
“Applied For” in box e, not your social security number, and see            6. Do not report noncash wages that are not subject to social
the Box b instructions for Form W-2 on page 7.                         security or Medicare taxes as social security or Medicare wages.
Box f—Employer's name. If you are not using the preprinted                  7. If you use an EIN on any quarterly Form 941 for the year
IRS label, enter the same name as shown on your Form 941,              (or annual Form 943) that is different from the EIN reported in
943, or CT-1. If available, use the label sent to you with             box e on Form W-3, enter the other EIN in box h on Form W-3.
Pub. 393.                                                                  To reduce the discrepancies between amounts reported on
Box g—Employer's address and ZIP code. If you are not                  Forms W-2, W-3, and Form 941/943—
using the preprinted IRS label, enter your address. See the                 1. Be sure the amounts on Form W-3 are the total amounts
instructions for Box e above.                                          from Forms W-2.
Box h—Other EIN used this year. If you have used an EIN                     2. Reconcile Form W-3 with your four quarterly Forms 941
(including a prior owner's EIN) on Form 941, 943, or CT-1              (or annual Form 943) by comparing amounts reported for—
submitted for 1999 that is different from the EIN reported on          ● Income tax withholding.
Form W-3 in box e, enter the other EIN used. In addition, agents       ● Social security wages, social security tips, and Medicare
must report the employer's EIN in box h. See Agent reporting           wages and tips. Form W-3 should include Form 941 or 943
on page 3.                                                             adjustments only for the current year. If the Form 941 or 943
Box i—Employer's state I.D. number. This number is                     adjustments include amounts for a prior year, do not report those
assigned by the individual states where your business is located.      prior year adjustments on the current year Forms W-2 and W-3.
You may want to complete this box if you use copies of this form       ● Social security and Medicare taxes. The amounts shown on
for your state returns. If reporting for two states, enter each I.D.   the four quarterly Forms 941 (or annual Form 943), including
number separated by the broken line.                                   current year adjustments, should be approximately twice the
                                                                       amounts shown on Form W-3.
Contact person, telephone number, fax number, and e-mail
                                                                       ● Advance earned income credit.
address. Please enter this information for use by the SSA if any
questions arise during processing.                                         Amounts reported on Forms W-2, W-3, and 941/943 may not
Note: The amounts to enter in boxes 1 through 15 described             match for valid reasons. If they do not match, you should
below are totals from only the Forms W-2 you are sending with          determine that the reasons are valid. Keep your reconciliation in
this Form W-3.                                                         case there are inquiries from the IRS or the SSA.
Boxes 1 through 10. Enter the totals reported in boxes 1
through 10 on the Forms W-2 being transmitted.                         Privacy Act and Paperwork Reduction Act Notice. We ask
Box 11—Nonqualified plans. Enter the total amounts reported            for the information on Forms W-2 and W-3 to carry out the
in box 11 on Forms W-2. Do not enter a code.                           Internal Revenue laws of the United States. We need it to figure
Box 12—Deferred compensation. Enter one total of the                   and collect the right amount of tax. Section 6051 and its
amounts reported with codes D–H and S in box 13 on Forms               regulations require you to furnish wage and tax statements to
W-2. Do not enter a code.                                              employees and to the Social Security Administration. Section
                                                                       6109 requires you to provide your employer identification
Box 13. Third-party payers of sick pay filing third-party sick pay     number. Routine uses of this information include giving it to the
recap Forms W-2 and W-3 must enter “Third-Party Sick Pay               Department of Justice for civil and criminal litigation, and to
Recap” in this box. See Sick pay below.                                cities, states, and the District of Columbia for use in
Box 15—Income tax withheld by third-party payer. Complete              administrating their tax laws. If you fail to provide this information
this box if you have employees who had income tax withheld on          in a timely manner, you may be subject to penalties.
third-party payments of sick pay. Show the total income tax               You are not required to provide the information requested on
withheld by third-party payers on payments to all your                 a form that is subject to the Paperwork Reduction Act unless the
employees. Although this tax is included in the box 2 total, it        form displays a valid OMB control number. Books or records
must be separately shown here.                                         relating to a form or its instructions must be retained as long as
                                                                       their contents may become material in the administration of any
Sick pay. Sick pay paid to an employee by a third-party, such          Internal Revenue law. Generally, tax returns and return
as an insurance company or trust, requires special treatment at        information are confidential, as required by section 6103.
year end because the IRS reconciles your Forms 941 with the
                                                                          The time needed to complete and file these forms will vary
Forms W-2 and W-3 filed. If the third-party payer does not notify
                                                                       depending on individual circumstances. The estimated average
the employer about sick pay payments, the third-party payer
                                                                       times are: Form W-2 — 32 minutes, and Form W-3 — 28
must prepare Forms W-2 and W-3 with respect to the employee.
                                                                       minutes. If you have comments concerning the accuracy of
See Sick Pay Reporting in Pub. 15-A, Employer's
                                                                       these time estimates or suggestions for making these forms
Supplemental Tax Guide.
                                                                       simpler, we would be happy to hear from you. You can write to
Reconciling Forms W-2, W-3, 941, and 943                               the Tax Forms Committee, Western Area Distribution Center,
                                                                       Rancho Cordova, CA 95743-0001. DO NOT send these tax
When there are discrepancies between amounts reported on               forms to this address. Instead, see Where to file on page 2.
Forms 941 or 943 filed with the IRS and Forms W-2 and W-3



                                                                                                                                  Page 11
             Case 2:04-cv-00493-FJM                  Document 67             Filed 08/31/2007             Page 26 of 27
                                                                              Reference Guide for Box 13 Codes
                                             A      Uncollected social security or RRTA tax on                                      K      20% excise tax on excess golden
                                                    tips                                                                                   parachute payments
                                             B      Uncollected Medicare tax on tips                                                L      Substantiated employee business expense
                                             C      Cost of group-term life insurance over                                                 reimbursements (Federal rate)
                                                    $50,000                                                                         M      Uncollected social security or RRTA tax on
                                             D      Elective deferrals to a section 401(k) cash                                            cost of group-term life insurance coverage
                                                    or deferred arrangement (including a                                                   over $50,000 (for former employees)
                                                    SIMPLE 401(k) arrangement)                                                      N      Uncollected Medicare tax on cost of
                                             E      Elective deferrals under a section 403(b)                                              group-term life insurance coverage over
                                                    salary reduction agreement                                                             $50,000 (for former employees)
                                             F      Elective deferrals under a section 408(k)(6)                                    P      Excludable moving expense
                                                    salary reduction SEP                                                                   reimbursements paid directly to employee
                                             G      Elective and nonelective deferrals to a                                         Q      Military employee basic housing,
                                                    section 457(b) deferred compensation plan                                              subsistence, and combat zone
                                                    (state and local government and                                                        compensation
                                                    tax-exempt employers)                                                           R      Employer contributions to a medical
                                             H      Elective deferrals to a section 501(c)(18)(D)                                          savings account (MSA)
                                                    tax-exempt organization plan                                                    S      Employee salary reduction contributions to
                                             J      Nontaxable sick pay                                                                    a section 408(p) SIMPLE
                                                                                                                                    T      Adoption benefits


                                                                                           See box 13 instructions for more information.




Index
A                                                                                                                                 Lost Form W-2             ..................................................................................................... 5
Address correction ........................................................................................... 1, 3
Adoption benefits .............................................................................................. 3, 9
Advance EIC payment ......................................................................................... 8                   M
Agent reporting ..................................................................................................... 3           Magnetic media reporting ................................................................................. 2, 3
Agricultural employers ........................................................................... 1, 3, 4, 10                    Medical savings account (MSA) ....................................................................... 5, 9
Alien residence status change ............................................................................. 3                     Medicare tax withheld .......................................................................................... 8
Allocated tips .................................................................................................... 7, 8          Medicare wages and tips ..................................................................................... 8
                                                                                                                                  Military employers .......................................................................................... 8, 10
                                                                                                                                  Moving expenses ............................................................................................. 5, 9
C                                                                                                                                 Multiple Forms W-2 issued to employee ............................................................. 7
Calendar year basis ............................................................................................. 7
Changes to note ................................................................................................... 1
Clergy ................................................................................................................... 3      N
Contact person for filing Form W-3 .................................................................... 11                        Nonqualified plans .......................................................................................... 8, 11
Corrections and voided Forms W-2 ................................................................. 3, 7
                                                                                                                                  P
D                                                                                                                                 Penalties ......................................................................................................... 6, 11
Deceased employee's wages ........................................................................ 4, 10
Deferred compensation ........................................................................... 7, 10, 11                       R
Dependent care benefits ...................................................................................... 8                  Railroad employers .............................................................................................. 5
Due date ........................................................................................................... 1, 2         Reconciling Forms W-2, W-3, and 941/943 ....................................................... 11
                                                                                                                                  Reissued Form W-2 ......................................................................................... 4, 5
E                                                                                                                                 Religious workers ................................................................................................. 3
Earned income credit notification ......................................................................... 2                     Repayments, wages received in error ................................................................. 5
Educational assistance programs ........................................................................ 4
Election workers ................................................................................................... 1            S
Employee business expense reimbursements ................................................ 4, 9                                    Scholarships ......................................................................................................... 5
Employee's taxes paid by employer .................................................................... 4                          Shipping and mailing ............................................................................................ 2
Employer identification number (EIN) ....................................................... 3, 7, 11                             Sick pay ................................................................................................. 5, 7, 9, 11
Extension to file Form W-2 .................................................................................. 2                   SIMPLE retirement account ........................................................................ 5, 8, 9
Extension to furnish Forms W-2 to employees .................................................... 3                                Social security number ..................................................................................... 3, 7
                                                                                                                                  Social security tax withheld .................................................................................. 8
F                                                                                                                                 Social security tips ........................................................................................... 7, 8
Fellowship grants ................................................................................................. 5             Social security wages ........................................................................................... 7
Forms, how to get ................................................................................................ 1              State and local tax information .......................................................................... 10
Fringe benefits ......................................................................................... 1, 4, 7, 8              Statutory employee ............................................................................................ 10
                                                                                                                                  Substitute forms ................................................................................................... 1
                                                                                                                                  Successor/predecessor employers ...................................................................... 5
G
Getting forms, publications, and help .............................................................. 1, 2
Golden parachute payments ............................................................................ 4, 9                       T
Government employers .................................................................................. 4, 10                     Taxpayer identification numbers .......................................................................... 3
Group-term life insurance ............................................................................ 5, 7, 9                    Terminating a business ........................................................................................ 5


H                                                                                                                                 U
Help ...................................................................................................................... 1     Uncollected taxes on group-term life insurance ..................................................                              9
Household employers ................................................................................ 2, 4, 10                     Uncollected taxes on tips ................................................................................. 8,                 9
How to complete Form W-2 ................................................................................. 6                      Undeliverable Forms W-2 ....................................................................................                   3
How to complete Form W-3 ............................................................................... 10                       USERRA contributions ................................................................................ 1, 6,                    9


I                                                                                                                                 W
Income tax withheld              ........................................................................................... 11   Wages ..................................................................................................................       7
                                                                                                                                  When and where to file ........................................................................................                2
                                                                                                                                  When to furnish Forms W-2 to employees ..........................................................                              3
L                                                                                                                                 Who must file Form W-2 ......................................................................................                  2
Legal representative ........................................................................................... 10               Who must file Form W-3 ......................................................................................                  2


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                         Case 2:04-cv-00493-FJM                                                    Document 67                                Filed 08/31/2007                                    Page 27 of 27

				
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