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Bob passed away December 8, 2013. His annual salary was $80,000.00 and he had 80 hours of accrued vacation. His YTD earnings prior to his death were $74,000.00. His surviving spouse received the vacation payout on December 28, 2013. How did the payment to spouse impact Bob's 2013 W-2?

A. Box 1 - $77,076.80; Box 3 - $77,076.80; Box 5 - $77,076.80
B. Box 1 - $74,000.00; Box 3 - $77,076.80; Box 5 - $77,076.80
C. Box 1 - $74,000.00; Box 3 - $74,000.00; Box 5 - $77,076.80
D. Box 1 - $74,000.00; Box 3 - $74,000.00; Box 5 - $74,000.00

1 Answer

1 vote

Final answer:

The accrued vacation payment to Bob's surviving spouse should be included in the 2013 W-2, which would increase the total amounts in Box 1, Box 3, and Box 5 by the amount of the vacation payout. The correct W-2 entries, including the additional $3,076.80 for the accrued vacation, would be $77,076.80 in each box, leading to Option A being the correct answer.

Step-by-step explanation:

The payment of accrued vacation pay after an employee's death is taxable income and should be included in the final W-2. Assuming Bob was earning $80,000 annually, we can calculate the amount owed for the 80 hours of vacation. Typically, an annual salary is based on a specific number of hours worked each year. For a standard work year (2,080 hours for full-time), the hourly rate would be $80,000 / 2,080 hours = $38.46 per hour. Therefore, the payout for the 80 hours of vacation would be 80 hours × $38.46/hour = $3,076.80.

Since the W-2 reflects the total earnings, the amounts in Box 1, 3, and 5 would include the vacation payout.

Therefore, the correct entries would be:

  • Box 1 (Wages, tips, other compensation): $74,000.00 (YTD earnings before death) + $3,076.80 (accrued vacation) = $77,076.80
  • Box 3 (Social security wages): $77,076.80
  • Box 5 (Medicare wages and tips): $77,076.80

The correct answer is Option A: Box 1 - $77,076.80; Box 3 - $77,076.80; Box 5 - $77,076.80. This includes both the YTD earnings and the vacation payout.

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