SECTION 6. APPLICATION IN CASE

OF SHORT TAXABLE YEAR

.01 Special rule for taxpayers with a short taxable year . In the case of a taxpayer with a short taxable year, subject to the rules of § 1.199–2(a), the paragraph (e)(1) wages of the taxpayer for the short taxable year shall include only those wages paid during the short taxable year to employees of the taxpayer, only those elective deferrals (within the meaning of § 402(g)(3)) made during the short taxable year by employees of the taxpayer, and only compensation actually deferred under § 457 during the short taxable year with respect to employees of the taxpayer. See § 1.199–2(b) of the regulations.

.02 Method required for a short taxable year and modifications required in appli- cation of method . The paragraph (e)(1) wages of a taxpayer with a short taxable year shall be determined under the tracking wages method described in section 5.03 of this revenue procedure. In applying the tracking wages method in the case of a short taxable year, the taxpayer must apply the method as follows—

(A) For purposes of section 5.03(A), the total amount of wages subject to Federal income tax withholding and reported on Form W–2 must include only those wages subject to Federal income tax withholding that are actually paid to employees during the short taxable year and reported on Form W–2 for the calendar year ending with or within that short taxable year;

(B) For purposes of section 5.03(B), only the supplemental unemployment compensation benefits paid during the short taxable year that were included in the total in section 5.03(A) as modified by section 6.02(A) are required to be deducted; and

(C) For purposes of section 5.03(C), only the portion of the total amounts

31, 2005, the amount of designated Roth contributions (as defined in § 402A).

.02 Correlation with Form W–2 . Under the 2006 Forms W–2, the elective deferrals under § 402(g)(3) and the amounts deferred under § 457 directly correlate to coded items reported in Box 12 on Form W–2. Box 12, Code D is for elective deferrals to a § 401(k) cash or deferred arrangement (plan); Box 12, Code E is for elective deferrals under a § 403(b) salary reduction agreement; Box 12, Code F is for elective deferrals under a § 408(k)(6) salary reduction Simplified Employee Pension (SEP); Box 12, Code G is for elective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental § 457(b) deferred compensation plan; Box 12, Code S is for employee salary reduction contributions under a § 408(p) SIMPLE (simple retirement account); Box 12, Code AA is for designated Roth contributions (as defined in section 402A) to a section 401(k) plan; and Box 12, Code BB is for designated Roth contributions (as defined in section 402A) under a section 403(b) salary reduction agreement. However, designated Roth contributions are also reported in Box 1, Wages, tips, other compensation, and Box 5, Medicare wages and tips, and are subject to income tax withholding.