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Form W-2c: the agony of errors

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in Centerpiece,Office Management,Payroll Management

The earlier you fix errors on your 2011 W-2s, the less likely it is you’ll be penalized by the IRS. E-filers have until the April 2 to file original W-2s (the due date for paper W-2s was Feb. 29), but even those few extra weeks may not be enough to get off the W-2c hook for mistakes that come to your attention after e-filing. Warning: The penalties for failing to file correct information returns have doubled.

Filing rules

Corrections to W-2s are reported to the Social Security Administration (SSA) on Form W-2c; Form W-3c is the transmittal.

W-2c forms may be filed on paper or electronically. E-filing is mandatory if you’re filing 250 or more W-2c forms; the first 249 forms can be filed on paper. Forms can be filed within 30 days of discovering the error, or held (i.e., bundled) and filed together. Bundled correction due date: Aug. 1, 2012.

The SSA’s web-based app—W-2c Online (see http://tinyurl.com/SSA-W2c-online)—allows you to create, save and print employees’ copies and submit up to five W-2c forms per submission, with a limit of 50 saved/unsubmitted reports. A Form W-3c is created for each W-2c Online report, even if the multiple submissions are for the same Employer Identification Number.

Good: You can resume working on unsubmitted forms that were saved. Better: You can use W-2c Online even if you filed W-2s on paper.

If you don’t use W-2c Online, W-2c e-forms must be formatted to the specs found in the SSA’s “Specifications for Filing W-2C Electronically (EFW2C).” Go to http://tinyurl.com/efw2c for the specs.

Delivery rules

Employees must receive their ­copies of W-2c forms as soon as possible. Forms may be mailed, hand delivered or e-delivered to employees. Heads up: If employees received their W-2s electronically, they must receive W-2c forms electronically. The rules for e-delivery of W-2c forms are generally the same as those that apply to W-2s. You must notify employees within 30 days of posting W-2c e-forms, and retain forms on your website until the later of Oct. 15 or 90 days after posting.

Common W-2 errors

The two most common W-2 errors are mistakes in boxes requiring monetary entries, and employee name/Social Security Number (SSN) mismatches. With one exception, you must file a W-2c form to correct all errors.

The exception: Most errors in Box 2, federal income tax withheld, aren’t correctable. If, due to a Box 2 error, employees were overwithheld, they’ll get larger refunds; if they were underwithheld, they’ll owe more tax.

Exception-to-exception: Correct Box 2 errors if the errors are administrative (e.g., transposed numbers). Important: Even if Box 2 isn’t corrected, correct related errors in Boxes 1, 3, 4, 5 and 6.

Heed these additional W-2c do’s and don’ts:

√ Do enter $0 in an appropriate box, if that’s the result of a dollar change.

Χ Don’t zero-fill W-2c boxes you’re not correcting; leave them blank.

Do file Form 941-X by April 30, 2012, to report FICA underwithholding and overwithholding errors ­discovered on 2011 W-2s.

Χ Don’t file a W-2c if you’re correcting an em­­ployee’s name/SSN, if the SSN was reported as blanks or zeros and the employee’s name was reported as blanks. Contact the SSA at (800) 772-6270 for instructions.

Χ Don’t file a W-2c with the SSA if you’re correcting only state/local information; send the form to the state/local agency.

Χ Don’t file a W-2c with the SSA if the only error on an employee’s W-2 is an incorrect address. Instead, you may provide him or her with a W-2c form with the correct address; place the incorrect W-2 in an envelope with the correct address and mail it to the employee; or issue a new W-2 containing correct information (but type REISSUED STATEMENT on the new form).

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