It is W-2 time again!

Wednesday, January 06, 2010

Each year, employers must send Copy A of Form W-2 (Wage and Tax Statement) to the Social Security Administration (SSA) to report employee wages and taxes for the previous calendar year.  SSA must receive these forms by the last day of February or the last day of March if electronic filing is utilized.

Employers must provide a W-2 to each employee by January 31, 2010, for individual income tax purposes.  W-2s are sent to the SSA with Form W3, Transmittal of Income Tax Statements.

Employers are required to file Form W-2 for wages paid to each employee from whom:

·         Income, Social Security or Medicare taxes were withheld

·         Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee’s Withholding Allowance Certificate.

The wage base for 2010 is $106,800.  All wages for an individual that exceed the wage base are not subject to Social Security tax (6.2%).

If the employee does not receive their Form W-2, they should contact their employer and find out when and if the W-2 was mailed.  If it was mailed, it may be returned to the employer because of an incorrect or incomplete address.  After notification of a missing W-2, the employer is required to re-mail or issue the W-2 within a reasonable amount of time.  If the employee does not receive the W-2 by February 14, they may contact the IRS for assistance.

If an employee misplaces a W-2, they may request a replacement and the employer is allowed to charge a fee for providing a new W-2.

If the W-2 is inaccurate, the employer may issue a corrected W-2 to the employee.  If the employee has already filed their tax return and the information does not match the income or withheld tax reported, they must file an amended return on Form 1040X.

Penalties?  You bet.

Use of a reporting agent or other third party payroll service provider does not relieve an employer of the responsibility to ensure that Form W-2 is furnished to employees and  filed correctly and on time.

If you fail to file a correct Form W-2 by the due date and cannot show reasonable cause, you may be subject to a penalty as provided under Section 6721.  The penalty applies if you:

·   Fail to file timely

·   Fail to include all information required to be shown on Form W-2

·   Include incorrect information on Form W-2,

·   File on paper when you were required to file electronically

·   Report an incorrect TIN

·   Fail to report a TIN

·   Fail to file paper Form W-2s that are machine readable

  The amount of the penalty is based on when you file the correct Form W-2.  The penalty is:

·   $15 per Form W-2 if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty is $75,000 per year ($25,000 for small businesses, defined on page 8).

·   $30 per Form W-2 if you correctly file more than 30 days after the due date but by August 1, 2011; maximum penalty is $150,000 per year ($50,000 for small businesses).

·   $50 per Form W-2 if you file after August 1, 2011, or you do not file required Form W-2; maximum penalty is $250,000 per year ($100,000 for small businesses).

Infinisource Payroll indemnifies our clients.  The IRS holds the employer responsible, but by using Infinisource Payroll you will know your payroll is being done properly.