At the end of every year, employers need to prepare and distribute W-2 forms to their employees to report wages, tips, deductions and other information. Employees need these forms to prepare their annual tax returns.
Employers also must file W-2s with the Social Security Administration (SSA) and appropriate state taxing authorities. Learn about the W-2 filing deadlines for 2019 and follow these steps before preparing these forms for your staff.
W-2 Form 2019: What You Need to Know
There are a few essential things you need to know about preparing W-2 forms.
1. Classifying Your Workers
There’s a difference between an employee and an independent contractor. The amount of behavioral control, financial control and the relationship between the company and the worker determine the classification.
In general, the IRS considers someone an employee if the business has the right to direct and control the work, including things such as where and when the work is done. Employee wages are reported on W-2 forms.
Independent contractors such as agents or brokers are charged with delivering a result, but they chose the manner and method in which to provide those results. Independent contractors might include outside consultants, contract information technology (IT) workers or those who perform work that isn’t essential to core business operations. W-2 forms aren’t given to contract workers, freelance workers or independent contractors. Payments to such workers are reported on 1099 forms.
Businesses should review the IRS rules on classifications and check with their legal advisers before classifying an employee. Failing to properly classify workers can result in fines and penalties.
2. Payroll Information
All W-2 forms must have the same basic information about your company. This includes the legal name and address of the business, the state tax ID numbers, and an employee identification number (EIN). If a business is new or doesn’t have an EIN, they will need to apply for one using an SS-4 form.
Each employee will have different information on their W-2 form, such as:
- Name, address, and social security number
- Gross pay, including wages, tips, and other compensation
- Federal income tax withheld
- Social security wages (subject to the maximum withholding amounts for the tax year)
- Medicare wages (including any additional Medicare tax for high earners)
- Benefits that are taxable to employees
- Any state wages and state income tax withheld
- Any local wages and applicable local income tax withheld
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3. Preparing the W-2 Form
Most businesses use tax-preparation software, accounting software or payroll services to fill out W-2 forms. If you are doing it yourself, be aware that you can’t write these forms by hand. The IRS recommends using blank ink and a 12-point Courier font to make it easier for machines to read.
Each W-2 form will have 4 copies:
- A is used for filing with the SSA
- B is for the employee’s use in filing their federal tax return
- C is a copy for the employee’s records
- Copy 1 is used for state, city, and/or local tax filing by the employee
W-2s Shouldn’t Be Confused With Employee Form W-4
The W-4 form is filled out by employees to let their employer know how much money to withhold from the paycheck for federal income taxes.
The W-4, known as the Employee’s Withholding Allowance Certificate, must be collected any time a new employee starts working at a company. Employers use the information to determine the amount of federal income tax to withhold from each paycheck. It will also be used to calculate state and other income taxes. Employers are required to keep a W-4 form on file for all employees.
The IRS has updated the W-4 form for 2020 in line with recent tax rate changes that were included in the Tax Cuts and Jobs Act of 2017. If new employees start in 2020, employers should use the 2020 W-4 form. Current employees don’t have to fill out a new version but should use the new one if they want to make any changes.
Contract workers or freelance workers don’t need to fill out a W-4 form. Instead, independent contractors must submit a W-9 form to businesses to which they provide services.
What’s the Deadline for W-2 Distribution?
Employers are required to distribute W-2 forms to employees by Jan. 31 of the year following the reporting year. W-2 forms reporting 2019 information have a deadline of Jan. 31, 2020. Future dates may change on years when Jan. 31 falls on a weekend.
The same deadline applies for 1099-MISC forms for independent contractors.
What’s the Deadline to File a W-2?
The same deadlines that apply to employee distribution also apply to filing with the SSA.
Employers can file employee W-2 forms with the SSA online or on paper. However, if employers opt to send paper copies of employee W-2 forms, they also will be required to fill out a W-3 form. The W-3 form is a summary of all W-2 wages and other information. Employee W-2 forms and employer W-3 forms are to be mailed together along with an authorized signature from the business.
1099-MISC forms for independent contractors need to be filed with the IRS by the same deadline date, along with Form 1096, which is a summary of the 1099-MISC information.
Employers should check with the taxing entity in their state for filing deadlines. Some states have different deadlines.
Filing W-2 Forms Online
Employers can file their W-2 forms online, using the SSA’s business service online website. Businesses must register first before using the system and verify the information.
For 1099-MISC forms, businesses upload them to the File Information Returns Electronically (FIRE) system. Forms must be transmitted electronically. Scans or PDF copies are no longer accepted. Employers must also request an original transmitter control code (TCC) before filing.
Starting in 2020, if employers have more than 250 forms of each type to file, they are required to file online. The number reduces for the next 2 years. In 2021, you must file online if you have 100 or more forms of each type. For 2022, it reduces to 10 or more forms of each type.
Keep in mind that states have different requirements for online filing of W-2 or 1099 forms. Businesses should consult their state’s Department of Revenue or Department of Taxation for specific requirements.
Correcting W-2 Errors
Employers should check carefully for the accuracy of W-2 forms before distribution. Mistakes can cause problems for employees when they go to file their taxes. They can also lead to fines for employers if they aren’t caught and corrected.
Before Filing With SSA
If you spot a mistake before the filing deadline, you can re-issue the form. Employers would check Void on Copy A of the incorrect W-2 and create a new W-2 with the correct information.
Employers should write “CORRECTED” on employee copies and distribute them. Then, employers file the correct version of copy A (without the “CORRECTED” notation).
After Filing With SSA
If you find an error after filing it with the SSA, you will need to fix the error. There’s a form for that, too: Form W-2c (Corrected Wage and Tax Statements) should be used to correct the error, which is then transmitted to the SSA.
Employers also will need to make the necessary correction to the W-3 form using Form W-3c. The W-3c form will need to be submitted even if the correction involves non-numerical information, such as name or address, even if that doesn’t change the amounts reported.
W-2 Extension 2019
The IRS grants limited exceptions to the filing deadlines. To qualify for an extension, employers must attest to the extraordinary circumstances that would cause a delay. The form lists such events as:
- A catastrophic event in a federally declared disaster area making records unavailable
- A fire or natural disaster that impacts operations
- The Death or serious illness of the person responsible for filing the information
There also have been exceptions made for businesses that are in their first year of operation.
Employers can only receive one extension, which extends the deadline for 30 days. Use Form 8809 (Application for Extension of Time to File Information Returns).
Employers that fail to file tax forms before the applicable deadlines can face penalties. Actions that can draw penalties include:
- Failure to file the correct forms by deadline dates
- The “intentional disregard” of filing obligations
- Failing to provide W-2 forms to employees
- Filing the wrong forms for employees
Penalties can be assessed by the IRS for each return that is incorrect or not filed. The amount of penalties will vary depending on the size of businesses (gross receipts) and the length of time before the correct forms are filed.
Other Payroll Tax Reports
There are other annual tax reports that are due before the end of the month in January each year:
- The Annual Federal Unemployment (FUTA) Tax Report using Form 940
- The 2019 Employer Quarterly Federal Tax Return using Form 941