Are You Filing Your W-2 Properly
Whether you are an employee or a business owner, you should ask yourself if you are filing your W-2 properly, because a single mistake could result in a penalty.
W-2s are perhaps the most common document that employers are required to provide, and employees must complete. As the government prepares for the possibility of another round of stimulus checks, one probable method they will use to try and collect their due money will be by taking advantage of W-2 misfilers.
To prevent your business from incurring unnecessary penalties, examine your employees’ W-2s with a fine-tooth comb. Be sure to take note of the most common W-2 form mistakes.
W-2 Form Rules and Regulations
A W-2 form reports an employee’s annual taxable wages and the amount of tax withheld from their wages.
According to the IRS, every employer engaged in a trade or business who pays remuneration, including non-cash payments of $600 or more, for services performed by an employee must file a Form W-2 for each employee.
The due date for filing 2020 Forms W-2 and all other W-2 type forms with the Social Security Administration (or SSA) is February 1, 2020.
Common W-2 Form Mistakes
While filing a W-2 may be a normal procedure for you by now, even the most innocent of mistakes could result in a fine – especially if the W-2 is late.
The IRS may impose a penalty for each W-2 Form with missing or incorrect information. For business owners, it is up to you to make sure all your employees’ forms are accurately filed and submitted on time.
For more information on the specific dollar amounts per penalty, refer to the IRS website.
Incorrect or Missing EINs and SSNs
The SSA and IRS maintain employer records via EIN (Employer Identification Number). If they receive forms with incorrect EINs, SSA internal records will be inaccurate.
Another common error is when an employee’s SSN is accidentally filled in the space meant for the EIN. Should an employee’s SSN be incorrect, the SSA cannot credit wage earnings to that employee’s records.
Mistakes involving EINs and SSNs may not cause penalties but could adversely affect your employees (and you as a result), such as the loss of benefits or issues with the IRS.
Use of Titles and Abbreviations in Name Fields
While it may seem unlikely that someone could mess up the name field on a W-2, the IRS reports that incorrectly formatting a name field is one of the most common mistakes.
The SSN does not allow for the inclusion of titles or abbreviations in the name fields, even if it is to clarify the employee’s position or title. When the SSA’s machines electronically identify an employee, excess titles and abbreviations will inhibit the scanners from correctly recognizing the employee.
The SSN wants to make their process as efficient as possible. Any deviation from their rules will be noted as an error – no matter how minor.
Errors on the Retirement Plan Field
When an employee is in a retirement plan or a simplified pension plan, they must indicate as such in the retirement plan field of Box 13.
Two common mistakes associated with this checkbox are inappropriately checking the box when the employee is not on a retirement plan and not checking the box when the employee is on a retirement plan.
Although a seemingly innocuous mistake, the consequences could be inconvenient and lead to income tax problems for the employee with the IRS.
W-2 Mailing Mistakes
The IRS and the SSN are separate entities. Nevertheless, the IRS reports that they receive loads of W-2s annually. W-2s must be filed with the Social Security Administration, or else you could receive a penalty in late fees.
Other mailing errors for W-2s noted by the IRS include Copy A paper forms that have been cut, folded, or stapled when mailed to the SSA. Also, mailing any copy other than Copy A of Form W-2 to the SSA is listed as an error.
Specific Rules for Filing W-2s
The SSA will receive tens of millions of W-2s each year. To keep their process as streamlined and efficient as possible, they must maintain strict rules. Seemingly insignificant mistakes they often notice include:
- Omitting the decimal point and cents from entries
- Making entries using ink that is too light; the machines will only identity black ink
- Making entries that are too small or too large; only 12-point Courier font, if possible
- Including dollar signs – money amounts should not have dollar signs
- Using W-2 forms from the incorrect year
Perhaps as equally as common as misfiling W-2s, is misfiling or forgetting to file your taxes. If you have years of unfiled back taxes, TaxRise can help you get in good standing with the IRS.
Any new or systemic Liens and/or Levies will also be suspended for the time being.
For taxpayers who are considered “seriously delinquent”, the IRS will suspend any new certifications for the remaining period. Any taxpayer who falls into this category in reminded and encouraged to enter into an Installment Agreement or apply for an Offer In Compromise.
The IRS will not forward any new delinquent accounts to private collection agencies at this time.
Taxpayers have until July 15, 2020 to verify to the IRS they are qualify for the Earned Income Tax Credit or to confirm their income. If the taxpayer is unable to verify their credentials or provide appropriate documents for this credit, they are encouraged to notify the IRS before the deadline. No cases will be denied this credit for failure to provide requested information until July 15.
Case workers will continue business as usual. However, most case work will be conducted remotely (video/over the phone conferences). Any requests for documentation sent by the Office of Appeals should be responded to in a timely manner to ensure a smooth process.
The IRS will continue to take the appropriate measures to stay compliant and protect the applicable statutes of limitations. In situations where certain statutes may be compromised, taxpayers are encouraged to extend such statutes. Otherwise, Notices of Deficiency will be issued by the IRS and similar actions will be pursued to protect the interests of the government in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.
Practitioners are reminded that PPS wait times may be significantly longer, depending on staffing levels and allocations going forward. The IRS will continue to monitor this as situations develop.
“The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others,” Rettig said. “We are committed to helping people get through this period, and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding – and your patience – as we navigate our way forward together. Stay safe and take care of your families, friends and others.”
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