What is a cafeteria tax plan?
A Cafeteria Plan is a reimbursement plan governed by IRS Section 125 which allows employees to contribute a certain amount of their gross income to a designated account or accounts before taxes are calculated.
What is Section 125 cafeteria plan IRS?
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.
Are cafeteria plans tax deductible?
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.
How is cafeteria plan reported on w2?
Box 14. Your employer may report your cafeteria plan deductions in Box 14, which is labeled “Other.” It might use the code “Section 125” or “Café 125,” and then state your pretax payments. This data is optional and can clear up any confusion you have about the amount in Box 1.
What is a cafeteria plan?
What Is a Cafeteria Plan? A cafeteria plan is an employee benefit plan that allows staff to choose from a variety of pre-tax benefits. Employees can contribute a portion of their gross income before any taxes are calculated and deducted.
What is IRS Section 125 cafeteria plan?
A Cafeteria Plan is a reimbursement plan governed by IRS Section 125 which allows employees to contribute a certain amount of their gross income to a designated account or accounts before taxes are calculated.
What is a 125 cafeteria plan?
A section 125 cafeteria plan is a benefits plan that resembles a menu of options for your employees to choose from. It’s nicknamed a “cafeteria plan” because an employee can choose between medical, dental, vision, and other employee benefits, or opt to receive the same amount in cash.
What is a cafeteria benefit plan?
A Cafeteria plan is a tax-free benefit program which is allowed under Section 125 of the Internal Revenue Code. This was enacted by Congress to help lower your cost by making these expenses tax-exempt from Federal, State and FICA taxes.