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Date: March 25, 2010

Bulletin Number: 982

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Subject

Social Security and Medicare Tax refunds and corresponding corrected Form W-2

Purpose

To inform agencies of the automatic correction of Form W-2s for employees who received Military Stipend Earnings in 2006, 2007, 2008 and 2009.

Affected Employees

Employees who previously received Military Stipend earnings that were subject to Social Security and Medicare tax withholdings beginning in 2006 through 2009.

Background

The Internal Revenue Service issued new regulations in 2009 making Military Stipend earnings exempt from Social Security and Medicare taxes.

OSC Actions

OSC will identify and mail corrected Form W-2s to the affected employees.  These corrected forms will reduce the reported Social Security and Medicare wages by the value of the Military stipend amount paid to the employee in the tax year.   The decrease in the reported Social Security and Medicare wages will result in a decrease in the Social Security and Medicare taxes withheld and reported in the original Form W-2.   Employees will be refunded their overpaid taxes once the monies are received from the Internal Revenue Service. 

OSC will begin corrections with tax year 2006. 

There will be no direct deposit for this refund check.

OSC will provide agencies a list of the affected employees.

Agency Actions

Agencies must inform employees that there is no effect on the reported Federal and State wages and that a Form W-2C will be automatically mailed to the employees’ address on file.

Questions

Questions regarding this bulletin may be emailed to the Tax and Compliance mailbox.