What is a W-2 Form?
W-2 forms are an important part of employees’ tax filings, listing all wages and salary paid along with the amounts withheld for taxes and benefits. W-2 forms include information about your business and employee details along with how much employees earn (including tip income), how much they withhold for tax (as specified on their W-4 form) plus social security and Medicare contributions, also factoring in retirement and special benefits plans. A W-2 form is required for all employees. However, for independent contractors, for whom taxes are not withheld, an employer is required instead to submit a 1099-MISC form, which simply reports payments. (Here’s how to figure out whether someone is an employee or an independent contractor.)
What are my basic responsibilities as an employer?
To ensure employees can file their tax returns on time, the IRS requires that employers prepare W-2 forms and provide them to employees on or before January 31. So that an employee’s tax returns can be verified, additional copies must be sent to the Social Security Administration (also by January 31) and, in some cases, to state-level administration.
Here’s where all the W-2 copies go:
Sent to Employees
- Copy B -- Filed with employee’s tax returns
- Copy C -- Kept by employee for their personal records
- Copy 2 -- Submitted to state tax authorities (if required)
Submitted to the Social Security Administration
- Copy A
Submitted to State Tax Authority (if required)
- Copy 1
Kept for employer’s records
- Copy D
Can an employee require more than one W-2?
If someone has been employed by more than one company during the tax year, they will require W-2s from their multiple employers. However, a single employer is only required to submit one W-2 per employee, even if they worked in multiple roles. There are rare exceptions when one employee works in different roles across different locations or when company ownership (or payroll provider) has changed mid-year— in these cases multiple W-2s will be issued with different Employer Identification Numbers.
What are the penalties for submitting W-2s late?
Your organization may face penalties if you fail to complete your employees’ W-2 forms accurately and on time. The IRS imposes different maximum penalties based on company size—they consider “small businesses” those with average annual gross receipts $5 million or less in the three most recent tax years.
For submissions up to 30 days late, the IRS can fine your company $50 per form with a maximum penalty for small businesses of $194,500 and $556,500 for others.
For submissions after 30 days but before August 1, the IRS can impose a fine of $110 per form, up to a maximum of $556,500 for small businesses, and $1,669,500 for larger businesses.
For submissions made on or after August 1, the fine per form will rise to $270, up to a maximum of $1,113,000 for small businesses, and $3,339,000 generally.
If you know your company will be unable to prepare your W-2 filings by January 31, it is possible to request a 30-day extension (using Form 8809), with an explanation of why you need the extra time. However, extra time will only be granted in the event of an “extraordinary circumstance or catastrophe”. It is not possible to apply for a second extension.
Can an employer charge for a replacement W-2?
If an employee loses their W-2 forms, an employer is obligated to supply a replacement. However, an employer is permitted to charge a “nominal amount” for this service.
What happens if there is an error on a W-2?
If errors were minor, you may benefit from “safe harbor” relief, whereby no penalties apply and no correction is necessary where no amount listed is wrong by more than $100, and no single reported amount of withheld tax is out by more than $25.
If errors exceed these rates, penalties will still be limited if you submit a new, corrected form before August 1, and you can explain why the error was made.
However, for more serious errors, especially where no reasonable explanation is given, penalties can be severe.
To make sure any errors are spotted as soon as possible, it is good practice to send completed W-2 forms to employees before the January 31 deadline.
What are other penalties for W-2 non-compliance?
If you file more than 250 W-2s in paper form, rather than online, you may receive a fine. You can also be penalized for submitting forms which are unreadable by machine.
There may be penalties for filing a 1099-MISC (intended for independent contractors) to someone who should be receiving a W-2.
Lastly, if you deliberately fail to submit a W-2 for an employee who requires one, the IRS can impose a fine of $550 per form, with no maximum limit.
What if an employee’s W-2 is undeliverable?
If a W-2 is sent to an employee but is then returned as undeliverable, it does not need to be forwarded to the Social Security Administration but should be kept in company records for four years.
Can W-2s be completed online?
Filing W-2s online is increasingly popular, more efficient and—for many companies—mandatory. Currently, all companies who file at least 250 W-2s are required to file online. However, for the 2021 tax year, online filing will be mandatory for all companies with at least 100 W-2s. From 2022, this number will drop to 10. (For now, if you want to file online, you can access the forms here.)
Start preparing now and move your filing process online. With Paycor, this is easy. As soon as your last payroll processing of the year is complete or after your books are closed, our experts get to work producing accurate and timely W-2s for our clients.
Paycor Can Help
Over the course of 30 years, Paycor has perfected the payroll process so you can confidently and accurately pay employees. Check out our products to learn more.
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