Come tax season in the US, one of the most important forms your business will need to submit is Form W-2.
While the form itself might seem simple enough, you must navigate several deadlines and rules to avoid penalties — and ensure your employees can file their income taxes accurately and on time.
In this article, we’ll explain what your W-2 responsibilities are as an employer, and how to ensure you meet these rules and deadlines. So let’s dive right in.
What is Form W-2?
Form W-2 — the Wage and Tax Statement — records all the wages you’ve paid to an employee in that tax year, as well as any taxes you’ve withheld on their behalf.
Employees need this information to complete their personal tax returns. They must also file a copy of their W-2 form with their tax return.
For each employee, Form W-2 contains their:
Social Security number
Employer Identification Number (EIN)
Name, address, and ZIP code
Control number (optional)
Wages/salaries received
Taxes withheld (including any federal, state, local, Medicare, or Social Security taxes)
Note that independent contractors do not require you to fill out Form W-2. Instead, they use Form 1099-NEC to report their income.
What are the employer’s responsibilities for W-2 filings?
As an employer, you must complete Form W-2 for every US-based employee you have, and make four to six copies.
Each copy is labeled for a specific purpose, as follows:
Copy A: You send this copy to the Social Security Administration.
Copy B: Your employee files this copy with their tax return.
Copy C: Your employee keeps this copy for their records.
Copy D: You keep this copy for your records.
Copy 1: You send this copy to state tax authorities (if required).
Copy 2: Your employee sends this copy to their state tax authorities with their state tax return (if required).
Employees may receive multiple sets of W-2s if they worked for multiple employees in the tax year. However, you only have to submit one set per employee, as laid out above.
Form W-2 filing and extension
The W-2 filing deadline is January 31 of the year after the tax year. If January 31 falls on a weekend, the deadline moves to the next business day.
To submit forms to the Social Security Administration, use Form W-3. If you’re filing 10 or more information returns, you must file them electronically. Note that this number includes W-2 forms and any other information return forms.
If for some reason you are unable to file on time, you can request a 30-day extension using Form 8809. Some valid reasons for requesting an extension can include:
A natural disaster making records unavailable, or filing impossible.
The personnel responsible for filing being unavailable due to death, injury, or other unavoidable absence.
First-time filers may also be granted an extension.
Penalties for Form W-2 non-compliance
If your W-2 forms are filed incorrectly, you may face penalties. This can happen if you:
Fail to file on time
Fail to include all required information
Submit incorrect information
File using the wrong method
File machine-unreadable paper forms
The maximum penalty for small businesses is slightly lower than that for large businesses and government entities. Note that the IRS defines a small business as having average gross annual receipts of $5 million or less in the three most recent tax years.
Lateness and inaccuracy penalties range from $60 to $310 per information return. This is broken down as follows:
Up to 30 days late: $60 per return or statement. The maximum penalty for small businesses is $220,500. Otherwise, the maximum penalty is $630,500.
31 days late through August 1 : $120 per return or statement. The maximum penalty for small businesses is $630,500. Otherwise, the maximum penalty is $1,891,500.
After August 1 or not filed: $310 per return or statement. The maximum penalty for small businesses is $1,261,000. Otherwise, the maximum penalty is $3,783,000.
Intentional disregard: $630 per return or statement. There is no maximum penalty for intentionally neglecting to file a return.
Interest accrues on penalties, but the date on which it starts accruing depends on the penalty amount and type. Interest continues to accrue until you pay the penalty balance in full.
Misclassification penalties, such as those which result from filing a Form 1099 instead of a Form W-2, can also occur.
If your business can’t cover the entire penalty, you can apply for a payment plan. To apply, pay what you can afford first, then fill out a payment plan application.
You can also dispute penalties, although you must show reasonable cause to support your case for penalty reduction or removal. This means proving that you acted responsibly before failing to file, but that circumstances beyond your control prevented you from filing on time and/or correctly.
Tips for filing W-2s quickly and accurately
Here are a few tips for filing accurate W-2s quickly:
Use payroll software
Payroll software can automate manual tasks and calculations, saving you time and resources. It also reduces manual errors, which are often caused due to the volume of data and the number of laws and regulations to navigate.
Remote’s payroll software can help you generate accurate W-2 (and other) forms in minutes, and also ensures you’re fully aware of all relevant deadlines. Learn more .
Always file electronically
Consider filing electronically, even if you don’t meet the 10-return threshold for mandatory electronic filing. It’s quicker, and it’s also easier to track your submission and keep records.
Filing electronically also reduces the likelihood of having to dispute an incorrect penalty for late filing if the IRS receives your form after the deadline.
Start the process as early as possible
The earlier you start filing your W-2s, the less pressure you’ll feel to get things done. Plus, if you do make an error, your employee will have more time to spot and fix it.
There’s no reason why this process can start before tax season. Review your employee information and payroll details before the year’s end to ensure everything looks correct. Then, address any problems or errors, and file as soon as you’re allowed.
Manage payroll tax forms with Remote
By filing your Form W-2s promptly and accurately, you don’t just save yourself a burden — you make life much easier for your employees, too.
Remote Payroll can automate all the relevant calculations, and make this time-consuming process quick, simple, and painless. To see how we can help — and to learn how else we can make your payroll and HR obligations easier — speak to one of our friendly experts today!
