In the United States, every business with employees must use W-2 forms to report the workers’ annual taxable wages and the amount of tax withheld. Companies can face penalties if any errors are made, so it is crucial that the following four common mistakes are avoided.
1. Using W-2 Forms from Unauthorized Vendors
It is good that you can get W-2 forms from various sources, but you need to ensure you obtain them from authorized sellers. Never make the mistake of getting the forms from unauthorized sources. Create a W2 form online with a reputable company like FormPros where forms are legally binding and secure.
These fillable forms are simple to generate and you can use the generator tool to calculate the state and federal tax withholdings for each employee’s salaries automatically. In addition to making sure the W-2 form comes from an authorized vendor, you need to ensure you have the most recent type of form.
W-2 forms change each year, so it is crucial you check that you are using the form for the correct tax year.
2. Providing Incorrect or Missing Information
One of the most common mistakes people make when filling out W-2 forms is forgetting to complete certain sections or providing incorrect information. If the Employer Identification Number is incorrect or missing, not only could records be credited to the wrong people. It could also result in the IRS penalizing you for failing to file correct reports.
Employee names and Social Security Numbers are just as important, not least because incorrect or missing entries can result in a loss of wages and benefits for the affected employees. Always double-check that information has been entered correctly on a W-2 form and that no boxes that should be filled out are left blank.
3. Not Checking All Relevant Boxes
It can be even easier to overlook checking boxes on W-2 forms, but again, you must double-check that you have completed every part of the form. For instance, employees who are active participants in a retirement plan should not forget to complete the Retirement Plan field of box 13. If they do, it can lead to the employee experiencing income tax problems.
4. Making Formatting Mistakes
Submitting handwritten W-2 forms is unacceptable, so make sure they are always printed. Another common formatting mistake is using blue ink, or another colored ink, instead of the required black ink. You must fill out a W-2 form with black ink because other colors are too light for scanners to process. You also need to ensure you do not add dollar signs to monetary amounts and that you use a font size that is large enough to read but not too big and goes outside of the field’s boundaries.
Employers need to ensure they do not send out their W-2 forms late. Employees must receive the forms by 31 January each year and the Social Security Administration must receive them by the same deadline. Late filings within thirty days of the deadline can result in penalties for employers of $30 per form. After thirty days, the penalty increases to $60 per form, until 1 August, at which point the penalty becomes a whopping $100 per form. So, do not underestimate how important meeting the due date is.
Ensuring you do not make the mistakes outlined in this post is also vital if you want to avoid paying penalties. A single incorrect W-2 form will result in a $250 fine for the employer, while intentionally failing to file a W-2 form comes with a penalty of $500. Other financial penalties exist for things like submitting handwritten forms or illegible forms, so it is critical that W-2 forms are filled out correctly.