SECTION 3. RULES OF APPLICATION

.01 In general . Section 1.199–2(a)(1) of the regulations provides that, except as provided in § 1.199–2(a)(3) and § 1.199–2(b), the Forms W–2, “ Wage and Tax Statement,” used in determining the amount of W–2 wages are those issued for the calendar year ending during the taxpayer’s taxable year for wages paid to employees (or former employees) of the taxpayer for employment by the taxpayer. For purposes of § 1.199–2, § 1.199–2(a)(1) provides that employees of the taxpayer are limited to employees of the taxpayer as defined in § 3121(d)(1) and (2) (that is, officers of a corporate taxpayer and employees of the taxpayer under common law rules).

.02 Wages paid by entity other than common law employer . Section 1.199–2(a)(2) of the regulations provides that, in determining W–2 wages, a taxpayer may take into account any wages paid by another entity and reported by the other entity on Forms W–2 with the other entity as the employer listed in Box c of the Forms W–2, provided that the wages were paid to employees of the taxpayer for employment by the taxpayer. If the taxpayer is treated as an employer described in § 3401(d)(1) because of control of the payment of wages (that is, the taxpayer is not the common law employer of the payee of the wages), the payment of wages may not be included in determining W–2 wages of the taxpayer. If the taxpayer is paying wages as an agent of another entity to individuals who are not employees of the taxpayer, the wages may not be included in determining the W–2 wages of the taxpayer.

.03 Requirement that wages must be re- ported on return filed with Social Security Administration . Section 1.199–2(a)(3) of the regulations provides that the term “W–2 wages” shall not include any amount that is not properly included in a return filed with SSA on or before the 60th day after the due date (including extensions) for such return. For this purpose, if a Form W–2c (or corrected return) is filed to correct a Form W–2 that was not

26 CFR 1.199–2: Wage limitation.

Methods of Determining W–2 Wages for Purposes of the § 199(b)(1) Limitation on the § 199 Deduction for Income Attributable to Domestic Production Activities

Rev. Proc. 2006–22