It's the start of a new year; your employees have probably started asking the inevitable question: "when will I get my W-2?"
If they are asking, that is a good sign! That means your employees are preparing to file their annual tax returns. However, they are most likely relying on you to complete their forms. So, let's review everything you need to know about distributing those W-2s and keeping your employees happy.
1. What is a W-2?
Also known as a "Wage and Tax Statement," a W-2 is a document that reflects an employee's compensation, benefits, and withheld taxes throughout the previous tax year. For any worker classified as an "employee," this is one of the most critical forms they need at tax time.
Employers must distribute a W-2 to all employees and former employees who received payments for their services during the tax year. This includes all workers who received wages or earnings of any kind, including noncash payments of $600 or more and:
- Income, Social Security, or Medicare tax was withheld
- Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee's Withholding Allowance Certificate.
Confused about all the boxes on the W-2? Get a detailed breakdown of every box on the form here.
2. Why do they Matter?
Employees are an asset to any business, so it's beneficial for an organization to prioritize distributing W-2s promptly because it matters to your workers. It's also crucial to a company's overall operations; businesses that fail to meet the distribution requirements face significant financial penalties.
For your Business
Missing W-2 deadlines can be costly for businesses. The fine amount depends on how far past the designated date a company manages to get the form sent.
- $50 per form if filed within 30 days of the due date
- $110 per form if filed after 30 days but before August 1
- $290 per Form W-2 if you file after August 1, do not file corrections, or do not file required Forms W-2
- $580 per form for intentionally disregarding filing.
For your Employees
A W-2 is a crucial document for any individual who held a position during the year and was classified as an "employee" while doing so. Those individuals are required to submit a W-2 from every employer for whom they worked. If a W-2 is not distributed to them, they will be unable to file their return and may face significant penalties.
3. How can W-2s be Distributed?
W-2s, by default, must be mailed to employees if they are not electronically distributed. Employers can offer the option for employees to access their forms via an employee self-service portal if their payroll system allows it. While receiving electronic W-2s is becoming more popular, employees must consent to receive their W-2 electronically. Regardless, employers must mail or electronically furnish all W-2s to employees by the deadline of January 31st deadline.
Need a better way to distribute W-2 forms to your employees? Check out the Greenshades Year-End Forms Solution.
To the Social Security Administration:
Employers must also send a copy of each employee's W-2 to the SSA each year, with an accompanying W-3 (Transmittal of Income and Tax Statements). These documents are key to reporting the wages and taxes of employees.
In recent years, the SSA has taken steps to reduce the number of forms filed on paper. The Taxpayer First Act, ratified in 2019, requires more employers to file W-2s or W-2Cs electronically. The act has determined the following implementation schedule:
- By January 31, 2022, employers who file 100 or more W-2s will have to send them to SSA electronically.
- By January 31, 2023, employers who file 10 or more W-2s will have to send them to SSA electronically.
Is your business required to file tax forms electronically? Find out here!
4. What is the Deadline?
Employers must file W-2s to the SSA and send copies to every employee by January 31st each year. If this date falls on a Saturday, Sunday, or legal holiday, the deadline will be the next business day.
Get a detailed list of deadlines and other important dates by downloading our 2023 HR Calendar!
5. What About Other Tax Forms?
W-2s are just one of many tax forms that your organization may be required to file at year-end. Check out the recap from our recent webinar about types of year-end forms and their deadlines to learn more about many of those forms.
New to the year-end process? Download our Beginner’s Guide to Year-End Forms to get an overview of the year-end form process and what you (and your teams) need to do to get ready.
Let Greenshades Help!
We understand that Year-End forms can be complex, but we are here to simplify the process for you. Greenshades has been helping small and mid-sized businesses with solutions and services that can ease the burdens of payroll, taxation, and HR-related issues.
In 2021, Greenshades filed year-end forms with 99% accuracy, so avoid any headaches at your year-end by taking advantage of our field-tested solutions. If you would like to book a discussion with one of our year-end forms processing experts, contact sales, sales @greenshades.com or call us at 888-255-3815, and we'll set up a time to discuss your specific needs.