A W-2 Guide For Employers: Facts, Figures, & Filing Deadlines
Let’s face it: tax season can be overwhelming, with hundreds of IRS forms to navigate through. And one of those is Form W-2. This form is required to show workers information about their wages and withholdings in the previous year that they’ll need when filing their personal tax returns.
As an outsourced payroll provider to more than 8,000 companies, we prepare and file W-2s so often that it’s become second nature. We know the information these documents must contain, how to complete them accurately, and when they’re due in order for businesses to maintain compliance.
In this article, we’ll discuss your responsibilities as an employer and the risks of Form W-2 noncompliance, including:
- What information you need to provide
- Filing requirements and deadlines
- Potential penalties
After reading this, you will understand the steps you need to take to avoid steep fines.
What is Form W-2?
Form W-2 is the IRS’ Wage and Tax Statement that ensures that both employee and employer taxes have been recorded and filed properly.
The form lists an employee’s wages for the year, which includes their wages, tips and any other compensation like bonuses or commissions for both salaried and hourly workers.
It also shows the amounts withheld from an employee’s pay for federal income taxes based on how they filled out their Form W-4 and state income tax, if applicable. The worker’s share of Social Security and Medicare taxes that was withheld from their pay is also reported. In some states like Rhode Island, there may also be taxes withheld for disability insurance, which would be on the form as well.
Beyond wages and withholdings, Form W-2 also shows benefits information. If you paid for child care benefits for your employees, that would go in Box 10. In Box 12, the Form W-2 will allocate other benefits with the applicable IRS codes such as:
- Contributions you made to a worker’s health savings account (HSA)
- Your cost of providing group term life insurance
- Your share of the employee’s health insurance premiums paid if you have 250 or more employees (employers with less than 250 employers are encouraged to provide this information as well)
- Deductions from the employee’s pay for their contributions to a 401(k)
In addition, there are several boxes on the form for basic employer and employee information:
- Employee’s Social Security number, which can now be shortened to the last 4 digits
- Employer Identification Number
- Employer’s name, address and ZIP code
- Control number (optional)
- Employee’s first name and initial and last name
- Employee’s address and ZIP code
Because of COVID-19, there may be additional information on your W-2s now. Specifically, you may need to include:
- Deferral of an Employee’s Social Security Tax: If any employee elected to defer their portion of the Social Security tax, you’ll need to include any wages for which you deferred this withholding in Box 3 and/or Box 7. However, the IRS’ reporting instructions says not to include in Box 4 any amount of deferred Social Security tax that hasn’t been withheld.
- FFCRA Leave: If you made any Families First Coronavirus Relief Act (FFCRA) sick or family pay to employees, IRS guidance says you’ll need to report the amounts in Boxes 1, 3, and 5. In addition, FFCRA wages must be reported separately in Box 14 or in a separate statement sent to the employee.
W-2 Filing Instructions for Employers
As an employer, you’ll need to complete a Form W-2 for each employee and file a copy with the Social Security Administration (SSA) by January 31 each year. However, in years when January 31 falls on a weekend, the deadline is the next business day. For example, this year, the deadline was February 1, 2021. If you ever need to request a 30-day extension, you can do so by submitting Form 8809.
To submit your forms to the SSA, you will use the transmittal Form W-3. You have the option to submit the W-2s and W-3 by mail or electronically using an authorized IRS e-file provider.
If you are submitting 250 or more Forms W-2, you must file electronically unless the IRS grants you a waiver. For 2021 forms filed in 2022, that number drops to 100.
In some cases, you may also need to submit a copy of each Form W-2 to your state tax authority. In the Northeast, the state requirements are:
- Connecticut: W-2s required along with a reconciliation form
- Maine: W-2 not required
- Massachusetts: W-2 required
- New Hampshire: W-2 not required
- New York: W-2 not required
- Rhode Island: W-2 required along with a reconciliation form
- Vermont: W-2 required
You’ll want to check with your department of revenue to understand your state’s W-2 filing requirement because some have different rules. For example, in Connecticut, you need to submit the forms electronically if you have 25 or more.
In addition, if you’re in a state with local income taxes, you’ll be required to submit a copy of Form W-2 to each locality where municipal tax was withheld during the year.
Do I have to provide a W-2 to each worker?
In addition to filing your forms, you’ll need to provide a Form W-2 to each worker. The filing deadlines we just discussed are the same dates by which you need to provide the forms to employees in order to give them enough time to complete their taxes. They’ll use the W-2 to enter the amounts reported on both their federal and state tax returns.
Workers will receive 3 copies of the W-2:
- For submitting with their tax return
- To keep in their records
- In case they need to provide it to their state tax authority
It’s a good idea to let employees know when they can expect their forms. If you’re distributing them electronically, you’ll want to make sure you tell employees that as well so they don’t miss their form.
Since employees may no longer work for you when you issue your W-2s, you’ll want to make sure you have an accurate mailing address on file for them. If you send an employee their W-2 and it gets returned to you, you should simply keep it in your records.
Form W-2 Penalties
To avoid potential penalties, it’s important to make sure you meet all the requirements for the Form W-2. The most common issues employers face when it comes to W-2s are submitting the forms late, failing to include all required information, or including incorrect information.
If you do any of these things and can’t show reasonable cause, you may face a penalty depending on when a correct form is eventually filed, which varies based on your size.
- Small Businesses: If you’re a small business, meaning one with average gross receipts of $5 million or less over the past 3 years, you can be fined:
- $50 per form filed up to 30 days late, up to a maximum of $197,500
- $110 per form if you file them after 30 days but before August 1, up to a maximum of $565,500
- $280 per form for submissions made on or after August 1 or not at all, up to a maximum of $1,130,000
- Large Businesses: Companies with gross receipts over $5 million in the last 3 taxable years can face the following penalties:
- $50 per form filed up to 30 days late up to a maximum of $556,500
- $110 per form filed 31 days late through August 1, up to a maximum of $1,669,500
- $270 per form for those filed on or after August 1, or not at all, up to a maximum of $3,339,000
If you realize you’ve submitted a form with errors, you can file a corrected version. However, if your error relates only to an incorrect dollar amount that doesn’t differ from the accurate amount by more than $100, then you fall under a safe harbor exception and don’t need to file a corrected form or face a penalty.
How Can I Stay Compliant With W-2 Requirements?
With the risk of costly fines for late, incomplete or inaccurate W-2s, it’s important to make sure you meet all your employer responsibilities for these forms. Since there’s a lot to keep track of when it comes to Form W-2, you may want to consider using an online filing service or have a third party payroll provider handle the forms.
At Complete Payroll Solutions, we include W-2 preparation and filing with all of our payroll plans. To learn more about this automated reporting for no-hassle compliance, visit our payroll page.