What Is Cafe 125 On A W2 Tax Form? (TOP 5 Tips)

Cafe 125 on a W-2 tax form refers to a cafeteria plan, in which an employer offers workers a choice between various job benefits. These benefits can include medical insurance, life insurance, adoption assistance, assistance with care for dependent elderly relatives, extra paid vacation days and similar.

What does less than Cafe 125 mean on w2?

These cafeteria plans allow employees to set aside pre-tax income for certain employer-offered benefits. Benefits provided by plans covered under section 125 include adoption and dependent care assistance, health insurance, 401k and group term life insurance policies.

What are Section 125 benefits?

What Is a Section 125 (or Cafeteria) Plan? A Section 125 plan is part of the IRS code that enables and allows employees to take taxable benefits, such as a cash salary, and convert them into nontaxable benefits. These benefits may be deducted from an employee’s paycheck before taxes are paid.

What does CAFE mean in Box 14 of w2?

Café 125 aka IRC Section 125 aka (Pretax) Health Insurance. Unless you live or work in the State of New York, this information is only that – information. You don’t need to enter it, and it won’t go anywhere.

What box is section 125 on w2?

The total dependent care benefits the employer paid to the employee or incurred on the employee’s behalf (including amounts from a section 125 plan) should be reported in Box 10 of Form W-2.

What is pre-tax 125?

In a section 125 plan or cafeteria plan, employees can pay qualified medical, dental, or dependent-care expenses on a pretax basis, which has the effect of reducing their taxable income as well as their employer’s Social Security (FICA) liability, federal income and unemployment taxes, and state unemployment taxes

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What is IRS Section 125 cafeteria plan?

A cafeteria plan, also known as a section 125 plan, is a written plan that offers employees a choice between receiving their compensation in cash or as part of an employee benefit. Employee contributions toward cafeteria-plan benefits are made pre-tax.

Why is it called a cafeteria plan?

A cafeteria plan gets its name from a cafeteria but has nothing to do with food. Just as individuals make food selections in a cafeteria, employees can choose the benefits of their choice before payroll taxes are calculated from a pool of options offered by their employers.

How does a cafeteria plan affect taxes?

Since 1978, cafeteria plans have allowed workers to divert some of their pre-tax pay toward fringe benefits, thus reducing their tax burden. Cafeteria plans reduce an employee’s taxable income under both the income tax and payroll tax, in contrast to 401(k) plans which are only deductible for income tax purposes.

Is a cafeteria plan the same as an FSA?

A Flexible Spending Account (FSA), sometimes referred to as a ‘Cafeteria Plan’ or ‘Section 125 Cafeteria Plan’, helps you keep more of your paycheck by reducing your Federal and state taxes. It allows you to pay certain expenses before taxes are deducted from your paycheck.

Is Cafe 125 tax deductible in NJ?

In general, most cafeteria 125 benefits are taxable income in New Jersey.

What is section 125 in box 14 on my W-2?

Box 14 s125 is for the amount of premiums that you paid tax free under an employer’s Section 125 (or Cafeteria) benefits plan.

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What is DD on W-2?

Health Insurance Cost on W-2 – Code DD Many employers are required to report the cost of an employee’s health care benefits in Box 12 of Form W-2, using Code DD to identify the amount. It is included in Box 12 in order to provide comparable consumer information on the cost of health care coverage.

Is a cafeteria plan the same as an HSA?

A cafeteria plan is an employee benefits plan administered under Section 125 of the federal tax code that lets employees pay certain expenses with pretax income. Funding a health savings account, commonly referred to as an HSA, may be an option under a cafeteria plan.

Is 401k considered section 125?

A 401(k) cafeteria plan allows employees who are participating in their employer’s 401(k) plan to also choose additional types of benefits from a smorgasbord of options on a pretax basis. These plans are sometimes referred to as Section 125 Plan (from the applicable IRS code) or a flexible benefits plan.

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