Phase 2 for 2018 W-2s begins
W-2s are filed with the Social Security Administration by the end of January; corrections, which are made on Form W-2c, begin immediately thereafter. The earlier you fix errors on your W-2s, the less you’ll pay in penalties to the IRS.
Key: If you correct errors within 30 days, the penalty is $50 a form. If you wait until after Aug. 1, 2019, the penalty spikes to $270 a form. Here’s the whole scoop.
De minimis safe harbor determinations. The IRS has set up a de minimis safe harbor for inadvertent minor math errors—errors that aren’t more than $100 or $25 in the case of withholding—as the default. You don’t have to notify employees of the safe harbor or of any mistakes on their W-2s.
Employees must elect in writing that the safe harbor not apply. Unless they say otherwise, their elections apply to all forms you’re required to file and to all years. If employees opt out, you have 30 days to provide them with W-2c forms and file those forms with the SSA.
The safe harbor, however, doesn’t apply to other errors, like employee name/Social Security mismatches or errors exceeding the $100/$25 thresholds, so you’ll still need to file W-2c forms for those errors.
Filing rules. W-2c forms may be filed on paper or electronically. If you’re filing on paper, your W-2c forms must be accompanied by the transmittal, Form W-3c. E-filing is mandatory if you’re filing 250 or more W-2c forms. Count carefully: If you file 200 W-2c forms in March and another 30 forms in May you don’t have to e-file. But if you file an additional 100 W-2c forms in May, e-filing applies to those 100 forms.
W-2c Online, the SSA’s free, web-based app, allows you to create, save and print employees’ copies. You can create up to 25 Forms W-2c per submission, with a limit of 50 saved/unsubmitted reports. A Form W-3c is created for each W-2c Online report, even if there are multiple submissions for the same Employer Identification Number.
Point your browser to ssa.gov/employer/bsohbnew.htm for information on W-2c Online.
Act fast: You may download PDF copies of your forms for delivery to employees and your records, but you only have 30 days from the date of your submission to do this.
If you don’t use W-2c Online, forms must be formatted to the specs in the SSA’s Specifications for Filing Forms W-2c Electronically (EFW2C). Go to http://tinyurl.com/ssapubs for the booklet.
Heads up: If you’ve formatted your files using the SSA’s EFW2C pub and you can’t upload your files, try using AccuW2C; it’s a free app that scans for errors in your W-2c files.
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. 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 the rules that apply to W-2s, but, in addition, you must notify employees within 30 days of posting W-2c e-forms, and keep those forms posted until the later of Oct. 15 or 90 days after posting.
Correction rules. The two most common W-2 errors are mistakes in boxes requiring monetary entries and employee name/SSN mismatches. With two exceptions, you must file a W-2c form to correct all errors. The exceptions: Most errors in Box 2, federal income tax withheld, and errors in Box 6 related to the 0.9% additional Medicare tax aren’t correctable.
If, due to a Box 2 or Box 6 error, employees were overwithheld, they’ll get larger refunds; if they were underwithheld, they’ll owe more tax. Exception to the exception: Correct Box 2 or Box 6 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.
✘ DON’T zero-fill W-2c boxes you’re not correcting; leave them blank.
✔ DO file Form 941-X by April 30, 2019, to report FICA underwithholding and overwithholding errors discovered on 2018 W-2s.
✘ DON’T file a W-2c if you’re correcting an employee’s name/SSN combination, if the SSN was reported as blanks or zeros and the employee’s name was reported as blanks. Contact the SSA at 1-800-772-6270 for instructions.
✔ DO make sure that the EIN reported on your W-2c/W-3c forms matches the EIN on your 941/941-X forms. If your EIN was incorrect, file W-2c/W-3c forms for each affected employee.
✘ 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.
✘ 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 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 (type REISSUED STATEMENT on the new form).
A step-by-step payroll compliance guide to each pay period, month and calendar quarter of the year is now available. Download it free here.