Set Up Nonqualified Deferred Compensation Plan Deduction Home | FAQs & Troubleshooting

 

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Follow this procedure to create a deduction code for a nonqualified deferred compensation (NQDC) plan. NQDC plan deductions do not reduce taxable wages. The deduction amount prints in box 11 on W-2 forms. To learn more, visit the IRS website or consult with your tax adviser.

Set up nonqualified deferred compensation plan

1. Select Payroll Setup menu > Deduction Code Maintenance.

2. Enter a new deduction code. For more information, see Deduction Code Maintenance - Fields.

3. In the Deduction Type field, select Pension Plan.

4. In the Tax Rule field, select one of the following rules:

   • -805106 (Nonqualified EE deduction)

   • -805102 (Nonqualified 409A EE deduction)

   Note This tax rule is provided as an example. Sage cannot and does not guarantee the applicability of any tax rule to your circumstances. Before processing payroll for your employees, test all tax rules to make sure the calculation provides the expected results. For specific tax advice, see your professional tax service provider.

5. Enter additional information for the deduction, and then click Accept.

When you calculate this deduction for employees during payroll processing, the deduction amount is reflected on the Benefits tab in Employee Maintenance after you update the Payroll Check Register. The yearly total for this deduction prints in box 11 (Nonqualified plans) on W-2 forms.

If you need to modify the calculated amount, go to Employee Maintenance, click the arrow in the top-right corner of the screen, and select Tax Summary. In the Employee Tax Summary window, click Benefits.