Back-pay under a statute is a payment by an employer pursuant to an award, determination or agreement approved
or sanctioned by a court or administrative agency charged with enforcing a Federal
or State statute protecting an employee's right to employment or wages.
As indicated in RS 01401.130, RS 01401.110, and RS 01401.140, IRS and SSA treat back pay under a statute in different ways. IRS considers back
pay under a statute as wages for the year in which the back pay award is paid (for
Social Security and Medicare and/or MQGE wages (Medicare Qualified Government Employment))
for taxation purposes.
SSA treats statutory back pay as wages paid in the periods in which they should have
been paid for Social Security purposes. The authority for this allocation is based on the U.S. Supreme Court decision, Social Security Board v. Joseph Nierotko , 327 U.S. 358 (1946).
To meet the needs of both IRS and SSA, employers should report statutory back pay
award amount(s) as wages (for the year in which received) on the employee's Form(s)
W-2 and Form(s) W-3 (or Magnetic media wage reports). If an employer did not include
these wages on a previously filed Form W-2, then the employer should prepare a wage
correction report (Form(s) W-2c and Form(s) W-3c (or Magnetic media)) to add the amount
of the back pay award to the wages previously reported. Employers should also prepare
a special report and send it to:
Social Security Administration
Attn: DTPS Back Pay Staff
6100 Wabash Ave
Baltimore, MD 21215
This report should include the following information:
A signed statement citing the statute under which the back pay was paid.
The employer's identification number (EIN) assigned by the IRS. (This is the same
number shown in box b of the 1993 Form W-2.).
The name and telephone number of a person SSA can contact if there are questions concerning
the back pay case and the employees involved.
A list of the affected employee(s) containing:
The employee's name and Social Security number (SSN).
The back pay award amount, excluding any amounts which are specifically damages or penalties.
The tax year in which the back pay was paid (and reported).
The total amount of wages paid (if any) to each employee and reported on that same
tax year's wage report. Exclude from these totals any amount of back pay included in that wage report.
For tax years prior to 1991, list of Social Security and/or MQGE wages.
For tax years 1991 and later, separate list for Social Security and Medicare and/or MQGE wages.
If the employer did not pay wages to the employee in that same tax year, the employer
should indicate that fact.
The period (month and year beginning and ending the period) for which the back pay
was awarded. Show the amount allocated each tax year for the employee (based on the
number of months in each year in the period) for which the back pay was awarded. (If
the employer is allocating to periods before January 1, 1978, SSA needs the wage amounts
by calendar quarter, i.e., quarters ending March 31, June 30, September 30 and December
SSA will reallocate the back pay amount to the appropriate report periods after the
original wage reports are processed to the earnings records and the back pay information
is submitted to SSA. Any other wages reported in the tax year the award payment was
paid to the employee will remain on the earnings records.
NOTE: Employers should NOT prepare Forms W-2c to reallocate wages for Social Security wage purposes.
EXCEPTION: If a State or local government employer covered by an agreement under Section 218
of the Social Security Act, inquires about reporting back pay under a statute when
the award was paid to an employee before January 1, 1987, they should contact their State Social Security Administrator's office. That office
can contact ORSI for further information, if necessary. See SL 80001.820 for more information.