For many payroll professionals, the rush of year-end has come and gone. However, an important date approaches in regards to W-2 compliance. Now is the time to make sure that you have filed all of the required forms and made any corrections to W-2s by August 1.
Starting August 1, there are increased penalties for a variety of different causes related to W2. The penalty for omitting required information or providing incorrect information on a W2 prior to August 1, was $60 per form, up to a maximum of $500,000 in a year. (Or $200,000 for small businesses.) After August 1, the penalty will increase to $100 per W-2 up to a maximum of $1.5 million in a year. (Or $500,000 for small businesses.) But the penalties don’t stop there. If you fail to furnish complete and correct W-2s to your employees, there is an additional penalty that is the same amount.
The IRS does offer a slight peace of mind in that they will not penalize employers for “inconsequential” errors and omissions in filing W-2s. That is, as long as the IRS can process the forms and use them for their intended purpose, inconsequential errors will be overlooked.
So how do you make sure that your W-2s were in compliance? Here is a short list of items on the W-2 that you want to make sure you have right. Errors related to these items are never inconsequential:
- taxpayer identification number
- the surname of the person required to be furnished the information set forth on the return
- any monetary amount
The IRS also provides a list of helpful items to double-check in the publication General Instructions for Filing Forms W-2 and W-3. These common errors are:
- Omitting the decimal point and cents from entries.
- Making entries using ink that is too light. Use only black ink.
- Making entries that are too small or too large. Use 12-point Courier font, if possible.
- Adding dollar signs to the money-amount boxes. They have been removed from Copy A and are not required.
- Inappropriately checking the “Retirement plan” checkbox in box 13.
- Misformatting the employee's name in box e. Enter the employee's first name and middle initial in the first box, his or her surname in the second box, and his or her suffix (such as “Jr.”) in the third box (optional).
There is some penalty relief for employers who have filing their W-2s on our before the due date and supplied to the IRS corrections to the errors or omissions on or before August 1. However, this penalty relief cannot exceed the greater of either 10 W-2s or 0.5% of the total number of W-2s required to be filed by the employer during the calendar year.
Is your company in compliance when it comes to filing and making corrections to W-2s? Keep August 1 in mind as you work to rectify any errors made on your company’s W-2s.
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.