The W-2, formally called the Wage and Tax Statement, is the annually required form that all employers must provide to each employee. In addition, a copy of each employee’s W-2 must be submitted by employers to the Internal Revenue Service (IRS). The form summarizes how much you’ve paid an employee (in salary, wages, tips or any other compensation), as well as the amount of taxes (income, Social Security and Medicare) that has been withheld from their paychecks.
For Your Calendar:
January 31st: Deadline for receipt of W-2s by all employees, as well as filing (online or paper) of W-2. It’s recommended that you provide W-2s to employees in early January so that any errors can be identified and corrected before filing. Your W-3 must also be filed by this date. Don’t forget – your Form 941 (Employer’s Quarterly Federal Tax Return) is due on January 31st, too.
As a small business owner, it can be laborious to ensure your business is compliant. Not filling in the right forms or not meeting the right deadlines can cost your company hundreds of thousands of dollars. To help you tackle W-2s and accurately file your employee’s wages and taxes, take a look at the W-2 related forms and process checklist below.
If your business does not file on time, you can be assessed penalties ranging from $50 to $550 per delayed or missing statement. This can amount to hundreds of thousands of dollars in fines depending on the number of applicable employees, and the length of the delay.
There are several related forms to the W-2. Here’s a brief snapshot of the most common ones:
- W-2c: Form used to correct and report errors to the IRS on a previously submitted W-2, as well as the form to provide a corrected document to employees.
- 1099-MISC: Form used to report miscellaneous payments your business has made to nonemployees, including independent contractors (of at least $600 in services).
- W-3: Also known as the Transmittal of Wage and Tax Statements, this form provides a summary of all wages you’ve paid to your employees, as well as a summary of the taxes withheld.
- W-4: Form also known as the Employee’s Withholding Allowance Certificate. It is completed by your employees upon hire and used to determine how much tax should be withheld from their wages. This form isn’t provided to the IRS, but is rather kept on file by you, the employer.
W-2 Preparation and Distribution Checklist
1. Know Your Deadlines
As year-end approaches, mark your calendar for important filing deadlines. January 31st is the deadline for providing W-2 statements to your employees, as well as filing copies with the IRS. The associated W-3 is also due on this day. Avoid costly late fees, which apply immediately after the January 31st deadline and increase after 30 days, as well as after August 1st.
Did You Know?
If the January 31st filing deadline falls on a Saturday, Sunday or legal holiday, the due date moves to the next business day. (www.irs.gov)
2. Determine Your Workers’ Status.
Be sure you understand and have correctly classified your workers as either employees or independent contractors. Employees perform services for your company under your direction, whereas independent contractors (ex.: consultants, agents, brokers) are typically non-essential and/or incidental in nature. If you require assistance classifying your workers and how you should file for their wages and taxes (form W-2 vs. 1099-MISC), you should consult with an Employment Attorney or other licensed professional.
3. Ask Employees to Double-Check the Information on Their W-4 is Correct
Now is a great time to request that your employees take a moment to ensure that the personal information they originally submitted when your hired them is still current and correct. Remember: employees can change their withholding on their W-4 at any time, and should report changes (new address, marital status, dependents) as soon as possible.
4. Get your Forms in Order
W-2 forms can be generated and printed via most payroll and tax preparation software, can be obtained from your accountant, or purchased in paper form through major office supply stores (order online or buy in-store). They can also be ordered directly from the IRS, either online or by phone usually beginning December 1st. The Social Security Administration also offers online tools for processing and printing W-2s (up to 50, and up to 25 W-2cs) through their Business Services Online.
5. Gather Required Payroll Information and Print W-2s
Again, if your business utilizes an online payroll or tax software, you can quickly and accurately generate required W-2 information for your employees. If not, you will need to gather and organize that information from your own records and manual payroll system.
6. Distribute W-2s
You can choose to mail your employees their W-2s, or deliver them in person at the office. Whatever method you choose, remember that accidents happen. Forms can be lost in the mail, or employees may misplace them. Be prepared to reprint replacement forms and recognize that there may be extra cost or added wait time associated with reprinting W-2s if you work with an outside vendor to produce them.
7. Remind Employees to Check W-2s for Errors and Report them to you ASAP
In addition to reviewing all printed W-2s before distributing to employees, ask that they also take a moment to review their form for any necessary corrections prior to the January 31st deadline.
8. File your W-2s and W-3 with the IRS
Your deadline is January 31st for both forms. And late fees will be assessed to your business starting one day after this deadline. You can file your forms online using the SSA Business Services Online (note there are limitations as to number of W-2s you can file online through their service), or you can mail your paper forms together to the IRS. Be sure to also check with your state tax authority or department of revenue for any additional requirements outside of providing copy of these forms. And remember that you’ll be required to provide copies to all applicable states your employee(s) work in.
With state and federal regulations constantly changing, it’s critical for your business to have HR resources that help you stay compliant. Learn how outsourcing your HR gives you the guidance and expertise you need to stay on top of payroll, benefits, and much more.