Did you know that you could receive penalties if you file incorrect W-2s or W-3s? Find out how to file corrections and what not to send to the IRS.
Filing incorrect W-2 or W-3 forms can result in penalties if left uncorrected. Fortunately, the IRS knows that mistakes happen and there is a system for amending and correcting these errant forms. Below, we’ll guide you through the steps and documents necessary to make your corrections before penalties are assessed!
Making Corrections vs. Filing Forms W-2c or W-3c
Corrections When You Haven't Filed Yet
If you correct a W-2 before you file it with SSA, you don't need to file a W-2c. Just make your correction and give it to the employee on a W-2 marked CORRECTED, marking the original one VOID; send both copy A’s to the SSA if you are filing paper forms. If you are filing 250 or more Forms W-2c, you must file electronically. If you are filing fewer than 250 Forms W-2c, you may bundle multiple paper filings before the filing deadline.
Corrections After You've Filed
Forms W-2c and W3-c are used to submit corrections after you file your original W-2’s and W-3’s. You need to file corrections as soon as errors are discovered - the earlier you file corrections, the better your chances are of avoiding penalties. Now that the W-2 SSA filing deadline has been accelerated to January 31, you may want to distribute W-2’s to employees earlier in January so that any problems can be identified before you file with SSA.
The SSA has made it simple to e-file your Forms W-2c with SSA’s web-based W-2c Online application. You can create, save, print and submit up to 25 Forms W-2c per submission, with a limit of 50 saved/unsubmitted reports. You can visit the SSA website for more information on this application. Also note that you must deliver Form W2-c to employees as soon as possible by mail or by hand.
There are two W-2 Box “errors” that are not correctable:
- If Box 2, Federal Income Tax Withheld, shows the employee’s taxes were overwithheld, don’t correct – the employee will get a refund. If Box 2 shows the employee’s taxes were underwithheld, don’t correct - the employee will owe more tax.
- If Box 6, Medicare Tax Withheld, shows an incorrect amount related to the 0.9% additional Medicare tax, don’t correct – again, the employee will either get a refund or owe taxes when he/she files.
Of course, there is one exception to this rule – if the errors in Box 2 or Box 6 were Administrative (typo, etc), do file a W2-c in that case.
The Dos and Don’ts of W2-c
Follow the following steps when filing W2-c to ensure the correction is done properly.
- Do enter $0.00 in the appropriate box if that is the result of your correction.
- Do file Form 941X by April 30 to report FICA underwithholding and overwithholding errors you found on your W2 forms.
- Do confirm that your EIN is correct.
- Do not add zeros in boxes you are not correcting – just leave them blank.
- Do not file a W2-c to correct a name/SSN if the original W2 SSN has blanks or zeros and the name has blanks. Contact SSA in this case.
- Do not file a W2-c to correct State/Local information.
- Do not file a W2-c only to correct an employee’s address; simply give the employee a new W2 with the word REISSUED printed on the form.
You are always going to have employees that need reissued W-2s or reprints of their W-2 and you can make your life easier by formally announcing to all employees these standard reissuing guidelines every year.
- If requests come via email, the subject line must read “W2 Request.”
- If requests come via phone, set up a dedicated voicemail box extension for these messages.
- Have employees personally verify these requests so you prevent identity theft or unauthorized parties from gaining access to W2 information.
- Release Reissued W2s to employees personally upon receipt of a signature with photo ID. If that’s not possible, overnight forms at the employee’s expense.
- Release these forms one day a week, when it’s convenient for you.
- You actually charge for this service. But be mindful of goodwill towards your customers/employees.
- Do not file copy A of a Reissed form with SSA.
- Make Form 4868, Application for Automatic Extension of Time to File US Individual Income Tax Return, available for employees who ask you for a Reissued form on/after April 15.
If you do have to send Forms W-2c or W-3c, make sure to follow the above advice to adhere to the SSA regulations. Visit the IRS website for other reasons they may reject Form W-2 wage reports and details on how you should make corrections.