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Amending Payroll Tax Returns

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Producing accurate payroll should be the primary goal of any payroll department. However, the reality is that mistakes do happen from time to time. Depending on the severity and timing of the error, the resolution may be as simple as calculating a small amount of retro pay or processing a missed deduction on a future pay date. Other times, the problem may be much more complex, especially if it’s an issue that crossed over into multiple calendar quarters or years. 

Oftentimes when this happens, the fix may involve amending and re-filing tax returns and/or generating a form W2C for the affected employee(s). This can be a very time-consuming process, and could also result in penalties and fines if the error caused the company’s tax filing or deposits to be short or late. In the unfortunate event that an error is discovered that requires amending tax returns, follow these tips to make sure the issue is resolved correctly and completely.

Find the Root Cause

Determine what the error is, and what caused it. This can be tricky, but it is critical to find the root cause to prevent the issue from coming up again. Some common culprits include incorrect setup of earning or deduction codes in the payroll software, miscalculations, or just plain human error in reporting and processing. Once the error is found, you can calculate what the correct reported or filed amounts should have been. 


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Prepare the Amendments

The IRS has a guide to help determine what form(s) need amendments, based on the situation. If the error resulted in underpayment of taxes, payment can be made via EFTPS or check. Don’t forget, if the error impacted any reported amounts to employees’ W2 forms, a W2C should be filed and issued to address the corrections. The Social Security Administration (SSA) provides some helpful tips for completing and filing W2C forms. 

If an employee receiving a W2C has already filed their taxes for the affected tax year(s), a company may choose to offer some financial assistance to help cover the costs of filing an amendment to their personal taxes, especially if the employer is at fault.

Confirm Your Process is Correct Going Forward

Now that the errors have been found and all of the appropriate amendments have been made, it’s important to make sure the root cause has been addressed. If it was a system issue, make sure the configuration is updated. A periodic audit of system settings can be useful for your team to spot discrepancies, and a second set of eyes to validate and confirm any manual entries or changes can be useful for reducing human errors. 

Use Payroll Experts When Possible

Dealing with corrections and amending tax returns can be a very time-consuming and stressful process. Working with a team of payroll experts can help cut down on the likelihood that errors are made in the first place. If there is a need for corrections to be made, they may be able to assist and guide you through the process while working with you to prevent the issues from coming up again. Contact Valor Payroll Solutions today and let us show you how we can help!

Christina Hageny

Christina Hageny

President - Valor Payroll Solutions

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