One of the most critical tax season forms for employers to complete and distribute to employees is Form W-2, which catalogs important information regarding wages and withholdings. Of course, based on your employee’s role, W-4 information, the location of your business and other factors, W-2s can sometimes require more involved information regarding benefits, disability insurance taxes, savings accounts and more.

In this article, we’ll outline what information you’ll need to have on hand to complete Form W-2 for your employees, including relevant deadlines and compliance considerations to help you avoid IRS or SSA penalties.

W-2 Basics: Wages, Withholdings, and Benefits 

W-2s should accurately record and report employee wages and employee/employer taxes annually for IRS processing. For hourly workers, the form also accounts for tips, while for salaried workers, it discloses supplemental compensation earned, including commissions, bonuses, etc.

Regarding withholdings, W-2s show all funds withheld from an employee’s pay for federal income taxes, as well as FICA taxes, using information from their state income taxes and W-4 when required.

Benefits are also documented in a W-2, whether it’s to capture employee deductions for 401(k) contributions, employer contributions to an employee’s HSA, employer life insurance costs, employer health insurance premiums, and more.

Essential information regarding the employee (SSN, full name, address and zip code) and employer (EIN and business name/address) must also be provided.

Throughout 2022, the IRS has made several W-2 policy changes that will impact 2023 taxes - related to disaster tax relief, limits on flexible spending accounts, Medicare taxes (for employees earning over $200,000), and more. Consult the IRS’ website or collaborate with a qualified payroll provider to navigate any recent updates that could apply to your organization or industry.

When and How to File W-2s (for Employers)

Each year, employers must provide a completed W-2 to employees by January 31st and file a copy of each W-2 with the Social Security Administration by the same date. Form 8809 must be submitted to file for a 30-day extension, though applying is no guarantee of approval. Employer-submitted W-2s should be sent to the SSA with Form W-3, which can be sent electronically or by mail. If your organization is submitting over 250 W-2s, electronic filing is required.

State and local filing requirements for W-2s vary based on the size of your workforce, policies regarding reconciliation forms, and other factors. Some states and localities do not require employer W-2 filing at all while others require it even for small businesses with less than ten employees.

Contact your payroll provider or your state’s/municipality’s department of revenue to determine whether W-2 filing is necessary based on the specifics of your organization.

Employee W-2 Reminders

Remember that you must provide three copies of the completed W-2 form to your employees. One is for their individual (federal) tax return filing, while the second is for submission to the state tax authority (when applicable). The third copy is for the employee to retain for their own tax records. 

Although your organization remains legally compliant as long as you send completed W-2 copies to employees by January 31st, be sure to inform your employees when they should expect their forms if they’re slated to arrive earlier electronically or by mail. This will help your employees organize their own supplemental tax documents before they file their individual W-2s.

Penalties for Noncompliance

Whether your organization omits important tax information, files late, or inaccurately calculates deductions, these errors can lead to sizable penalties.

For large businesses grossing over $5 million annually, penalties could be as severe as $3.4 million (cumulatively) for late forms filed, or nearly $1.2 million (cumulatively) for small businesses committing the same infractions. Fines average anywhere from $50-$280 per day for each individual form that is either unfiled or inaccurately filed.

W4 Guide

File W-2s Accurately and Hassle-Free with Cello HR

Without professional guidance, completing W-2 filing for your organization can be a complicated, time-consuming, and worrisome process. That’s why Cello HR offers expert tax support and an intuitive and integrated payroll platform that simplifies your entire payroll process. Our goal is to make your organization’s year-end payroll process hassle-free and to keep your operations streamlined, legally compliant, and synthesized with all other facets of your HR and HCM practices (from scheduling to timekeeping and benefits administration).

Ready to enjoy peace of mind around tax season? Contact us today to let us know how we can support you – now and throughout the new year.