Redirect After-Tax Deductions to a Sec 125 Plan
If a client is contributing money in after tax contributions that are eligible for Section 125 contributions (for example, in child care contributions), it may be illustrated by using the following steps:
1.Be sure the value is entered in the After-Tax Deductions on the left and that if the Section 125 contribution has a value it is itemized.
2.In either Proposed #1 or Proposed #2, reduce the After-Tax Deduction value by the value eligible for the Section 125 contribution.
3.In the same column, enter the value reduced in the After-Tax Deductions field into the Pre-Tax 125 field.
4.Finally, move the increase in pay to the qualified plan by entering a '0' in the Change in Pay line.