As we enter the new year, it is time to prepare for the various required annual reporting and filings for your business. Perhaps one of the most important items to consider during this time is the filing and distribution of each employee’s form W-2. Form W-2, formally known as the IRS Wage and Tax Statement, summarizes each employee’s earnings and tax information for the calendar year. This form contains information that employees will use to file their annual taxes, and is also used by third parties such as banks or landlords to verify and validate an individual’s income. Needless to say, the W-2 is an important document and filing them correctly is a critical task for any business.
W-2 forms are required to be distributed to employees by January 31st, or the next business day if the 31st falls on a weekend. While this may seem like ample time to prepare and distribute the forms, keep in mind that many third-party vendors who provide W-2 services may require earlier submission in order to meet deadlines. Following these tips can help reduce late submissions and dreaded W-2Cs during the filing season.
Verify Employee and Employer Information
Make sure employees’ legal names are spelled correctly in your system and verify that you have the correct SSN and address information on file. If your company uses a self-service portal to house HR and payroll data, employees may even be able to log in and verify or update their own information. The company name, address, and Employer Identification Number (EIN) are printed on each form, so a quick check to make sure the information is correct will save a lot of headaches later.
Review Mapping of Payroll Information to W2 fields
Not everything that runs through your payroll system will necessarily be reportable on the W-2. Some items also call for special coding in box 12. Review each pay and deduction code in your system to make sure they are properly mapped to the appropriate box(es) of the W-2. This can also be a good time to clean up the pay and deduction codes in your system, to keep your payroll setup neat and organized.
Audit W-2 Data
Most payroll systems will have the ability to provide preliminary W-2 data or reports that can be reviewed or audited before being finalized. These reports can be used to identify any potential issues that should be addressed before finalizing the forms. Some items to look out for include negative wages or taxes, and proper classification of box 12 items. Auditing of W-2 data is usually something that can be done at any time during the year. Many payroll professionals find it helpful to conduct periodic audits throughout the year so issues are caught and resolved early, preventing last-minute corrections during the year-end season.
Outsource Payroll to Ensure Compliance
Late and/or incorrect filing of W-2 forms can result in penalties and time-consuming corrections. When corrected forms and filings are required, these can cause a burden on the impacted employees as well. Outsourcing payroll with a partner like Valor Payroll Solutions helps take the stress out of payroll compliance and W-2 filing. We’ll save you time and eliminate the risk of penalties so you can focus on your core business. Contact us today!
