By the time employees start returning from the Christmas break, the payroll department should already be working on getting W-2 forms to staff members before the end of January. This is crunch time for payroll departments, given the amount of work that has to be done between the end of December and January 31. Moreover, it is important that things be done correctly and on time.
In an effort to ensure employers comply with the law, the federal government has instituted penalties for filing W-2s incorrectly or late. Those penalties were raised in 2015; they are set to rise again in 2018 and 2019. As an employer, you cannot afford to be either late or wrong. Get the payroll and HR staff working on things now so that you are not caught off guard come January.
Higher Penalties for 2018
Higher penalty amounts for 2018 apply to all W-2 forms for the 2017 tax year to be filed in January of 2018. The basic penalty for a late or incorrect W-2 is $260 per return. Additional penalties (this is not an exhaustive list) include:
- Maximum basic penalty – $3,218,500
- Maximum basic penalty for small businesses – $1,072,500
- Corrected W-2 within 30 days – $50 per return
- Corrected W-2 after 30 days but prior to August 1 – $100 per return.
Note that there are maximum penalties for corrected W-2 forms for both small businesses and their larger counterparts. For 2019, some of the penalties will be increasing yet again. For example, the basic penalty will rise $10 per return. Penalties for individual corrected W-2s will not be going up in 2019; maximum penalties for multiple W-2 corrections will.
Other Things to Know
Employers need to be mindful that W-2 forms must be filed with the Social Security Administration and given to employees no later than January 31. Furthermore, automatic extensions are no longer available to prevent W-2s from being late. Employers who need more time are required to file Form 8809 for a 30-day extension.
Next, the IRS does have some latitude when it comes to W-2 errors. Mistakes they deem inconsequential may be left to slide without penalties imposed. However, there is no hard and fast rule that defines inconsequential errors. The general rule states that inconsequential errors are those that do not prevent the IRS from using the form for its intended purpose. Such ambiguity suggests that it is best to avoid errors rather than relying on the IRS to classify mistakes as inconsequential.
What Can Be Done Now
The last thing payroll department need is to come back after the Christmas break and find themselves under the gun to get W-2 forms taken care of by the end of the month. Fortunately, there are things companies can do throughout late November and all of December to reduce the January workload.
First and foremost, December is an excellent time to get with staff members to ensure their personal information is correct. Employees should be verifying their legal names, addresses, and Social Security numbers. This is critical information for the W-2.
Next, the payroll department can go over payroll records to ensure all wage and tax withholding information is accurate. Where any inaccuracies are found, they should be corrected as soon as possible.
Of course, any company struggling with any aspect of payroll can contract with a payroll and benefits administration service provider like BenefitMall. America’s payroll services are very adept at handling W-2s. They are able to save a company a ton of trouble at one of the busiest times of the year.