Hunter is a single 45-year-old who is employed by an engineering firm that includes a diverse array of taxable and nontaxable fringe benefits within the overall compensation package it offers its employees. Employees receive a base salary in addition to occasional incentive awards (i.e. bonuses); the incentive awards are often in the form of noncash perks. The company also offers different forms of equity-based compensation to reward its highest performing employees.

Hunter does not itemize deductions, and he does not have any available tax credits or estimated tax payments. His employer withheld $23,668 from his paychecks for income tax withholding.

Hunter's base salary for calendar-year 2018 was $101,350. He embarked on an all-expenses-paid 5-day Caribbean cruise in April 2018, which he received from his employer in lieu of a cash bonus. The cruise and related travel expenses would have cost Hunter $4,025 if had paid for the trip out-of-pocket. His employer agreed to give Hunter an extra $1,375 in cash to cover his tax liability on the value of the cruise (referred to as a "tax gross-up"). Tax gross-up payments are included on an employee's paycheck as ordinary wages subject to income and payroll taxes.

Hunter also took advantage of the following pre-tax payroll deductions:

Annual employee contribution to employer's 401(k) qualified plan = 6% * $101,350 base salary = $6,081/year (his employer provides a 75% match as well, i.e. $4,560.75/year) Annual employee contribution to a flexible spending account ("FSA") = $2,400/year Annual employee contribution to health insurance plan = $1,440/year

A summary of the above-mentioned compensation details is provided in the following table:

Description 2018 Amount Base salary $101,350 Non-cash incentive award - all-expenses-paid cruise vacation $4,025 Tax gross-up for the non-cash incentive award $1,375 Payroll deduction - Employee 401(k) contributions $6,081 Payroll deduction - Employee FSA contributions $2,400 Payroll deduction - Employee portion of insurance premiums $1,440 Income taxes withheld from paychecks $23,668

Hunter is a highly-valued engineer at the company and thus has been rewarded quite handsomely the past few years with several equity-based compensation awards. In 2018 Hunter decided to sell 4,360 shares of stock that he received pursuant to the terms of these awards.

Type of Equity Award Section 83(b) Election? Number of Options/Shares Granted Grant Date FMV/share @ Grant (Exercise Price) Vest Date FMV/Share @ Vest Exercise Date FMV/Share @ Exercise Number of Shares Sold Sale Date Sales Proceeds per Share Restricted Stock Yes 610 shares 1/1/2016 $9.50 1/1/2018 $11.75 610 5/1/2018 $17.50 Restricted Stock No 950 shares 1/1/2017 $11.30 1/1/2018 $11.75 950 5/1/2018 $17.50 Restricted Stock Yes 1,225 shares 1/1/2018 $11.75 1/1/2019 $10.90 Nonqualified Stock Options 100 options - 7 shares per option 1/1/2016 $9.50 1/1/2017 $11.30 1/1/2017 $11.30 700 5/1/2018 $17.50 Nonqualified Stock Options 200 options - 7 shares per option 1/1/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 1,400 5/1/2018 $17.50 Incentive Stock Options 100 options - 7 shares per option 1/1/2016 $9.50 1/1/2017 $11.30 1/1/2017 $11.30 700 5/1/2018 $17.50 Incentive Stock Options 200 options - 7 shares per option 1/1/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75

In addition to his base salary, incentive award and equity-based compensation, Hunter also received the following taxable AND non-taxable fringe benefits from his employer during 2018:

Fringe Benefit Description Company's Annual Cost Hunter's Annual Cost Health insurance The company offers health insurance* to all employees. The monthly premium for each employee is $300, of which the company pays 60% and the employee pays 40% via a pre-tax payroll deduction.

*Hunter elected to receive health insurance coverage for 2018.

$2,160/year $1,440/year Accidental death and dismemberment ("AD&D") insurance The company provides AD&D insurance to all employees, free-of-charge. $180/year $0 Fitness facility membership The company offers a fitness facility membership* to all employees, free-of-charge. The fitness facility is not located on the company's business premises and is open to the general public.

*Hunter elected to receive a membership in the fitness facility for 2018.

$816/year $0 Employer-provided cell phone The company provides all engineers with a company phone, due to frequent after-hours client calls as well as the significant number of clients residing outside of the United States. Employees are not allowed to use their company phone to make personal calls. $444/year $0 Basic group-term life insurance policy The company provides group-term life insurance ($50,000 policy) to all employees, free-of-charge. $90/year $0 Supplemental group-term life insurance policy The company offers supplemental group-term life insurance* to all employees. The supplemental life insurance coverage employees can elect is capped at 8 times their base salary or $500,000, whichever is lower.

*Hunter elected to receive the maximum allowable $500,000 in supplemental life insurance for 2018.

$900/year $240/year Employer-provided meals The company provides catered lunches to all employees on Mondays and Wednesdays, free-of-charge. The meals are furnished for the convenience of the company and are provided on the company's business premises. $1,352/year $0 Qualified parking The company provides qualified parking access at a parking garage located on the company's business premises to all employees, free-of-charge. $3,900/year ($325/month) $0

Hunter's employer was required to enter certain items on his 2018 Form W-2 Box 12 that were assigned a specific code for Hunter to reference as he prepared his 2018 Form 1040. Match the 2018 Form W-2 Box 12 code with the applicable amount that Hunter would have been provided by his employer.

You will likely need to reference the 2018 Form W-2 instructions that provide a description for each of the Box 12 codes - you can access the Form W-2 instructions by copying and pasting the following URL into your web browser:

https://www.irs.gov/pub/irs-pdf/fw2.pdf

2018 Form W-2 Box 12b Code D 2018 Form W-2 Box 12d Code DD 2018 Form W-2 Box 12a Code C 2018 Form W-2 Box 12c Code V Match each of the options above to the items below. 660 660 Open choices for matching 6,081 6,081 Open choices for matching 630 630 Open choices for matching 2,160 2,160 Open choices for matching