Tax Implications
Deferrals
- Your deferrals are not subject to federal or state income taxes at the time of deferral.
- The taxable wages shown on the Form W-2 you receive from Komatsu at the end of each year will be reduced by the amount of the deferrals you made during the calendar year. However, Social Security and Medicare taxes will be withheld from both employee deferrals and company contributions.
- You will not pay income taxes on your deferrals, or on any earnings, until they are distributed to you.
Distributions
- Any distributions (including distributions for an unforeseeable emergency), will be subject to mandatory federal and state income taxes.
- At the end of the calendar year in which you receive a distribution, you will receive an IRS Form W-2 from Fidelity showing the amount of your distribution and taxes withheld. You will need to report the distributions as "wages" on your tax return.
- You may have to pay taxes to the state you lived in while you made your deferrals. You may want to consult a tax adviser to fully understand your tax situation and tax obligations.
Future tax law changes
If the current tax structure changes, the anticipated economic benefits of participating in the DCP could change. For example, if income tax rates increase significantly or capital gains taxes decrease, the DCP's benefits might be reduced. Conversely, income tax reductions could increase the benefits of deferral. In addition, state income taxes could have a further impact for some participants.
