Form W-2

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Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

Form W-2

What is Form W-2?

Form W-2 is an IRS document that details the amount of compensation paid to employees for the previous year, including the amount of taxes that were withheld. These forms are divided into two different sections, as employees file taxes with their state government and the federal government when preparing their tax returns

Which Employers Are Required to File Form W-2?

Every employer must file a Form W-2 for each employee from whom income, Social Security, or Medicare tax was withheld. Employers send a copy of Form W-2—also called the Wage and Tax Statement—to both the employee and the IRS. 

Form W-2 Tips and Best Practices for Filing

The following tips will help make sure your workforce’s W-2 forms are handled correctly and efficiently. For more information on how to file, visit the IRS website.

  1. Plan Ahead: Make sure you know how you plan on filing this year. Employers must e-file if they are required to file 250 or more Form W-2 documents. The Social Security Administration encourages all employers to e-file, which can save employers time and effort and helps ensure accuracy, according to the IRS. If employers who are required to file electronically do not do so, they may face a penalty. 
  2. Update Employee Addresses: Employers should make sure to have the most recent employee information on file, especially since some employees might have moved (either permanently or temporarily) during the coronavirus pandemic. Do you have your employees’ updated addresses on file? Send out a communication to your team as soon as possible to make sure you know where to send their Form W-2 files.
  3. Communicate with Employees: Let your employees know how they’ll receive their forms, especially if your company is distributing the Forms W-2 electronically. If your team is used to receiving their Form W-2 in the mail, be sure to communicate any changes so that they don’t miss it.

Updates to Form W-2 for Filing in 2021

As employees begin to receive tax forms, employers should keep in mind the following changes to Form W-2:

  1. Truncation of SSN on Employee Copies of Form W-2: According to an IRS final rule, employers may now shorten the employee’s social security number to the last four digits on employee copies of Forms W-2. However, employers cannot truncate the employee’s SSN on Copy A, which is filed with the Social Security Administration. Check with your state or local governments to determine whether you are permitted to shorten SSNs on copies of Form W-2 submitted to the state.
  2. FFCRA Impacts: The IRS released a statement that employers must report the amount of qualified sick leave wages and qualified family leave wages paid to employees under the Families First Coronavirus Response Act on either 2020 Forms W-2, box 14, or on a separate statement. Instructions for reporting this can be found on the IRS website.
  3. Adhere to the Deadlines: For the 2020 tax year, employees should receive their Form W-2 from their employer no later than Feb. 1, 2021. The deadline changed because January 31 falls on a Sunday in 2021. This deadline applies to both electronic filing and paper filing.
  4. Requests for Extensions: The IRS announced that letter requests for extension of time to furnish statements to recipients should be faxed to the IRS. The details for this process, including the fax number and information to include in the letter can be found here.
  5. Increased Penalties: Penalties have increased for failure to file and intentional disregard of filing and payee statement requirements. The increase in penalties is due to adjustments for inflation and the amount of the penalty (which can be found on the IRS website).

Updated Form W-2 Fines

Some businesses may be subject to penalties for failure to file Form W-2 on time. These fines are split into two categories: 

For Large Businesses with Gross Receipts of More Than $5 Million:

Time returns filed/furnishedNot more than 30 days late31 days late – August 1After August 1 or Not at AllIntentional Disregard
Due 01-01-2020

thru 12-31-2020

$50 per return or statement –              

$556,500 maximum

$110 per return or statement –

$1,669,500 maximum

$270 per return or statement –

$3,339,000 maximum

$550 per return or statement –

No limitation

 

For Small Businesses with Gross Receipts of $5 Million or Less:

Time returns filed/furnishedNot more than 30 days late31 days late – August 1After August 1 or Not at AllIntentional Disregard
Due 01-01-2020

thru 12-31-2020

$50 per return or statement –

$194,500 maximum

$110 per return or statement –

$556,500 maximum

$270 per return or statement –

$1,113,000 maximum

$550 per return or statement –

No limitation

Related Terms: Form W-4, Form I-9

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