E-Forms W-2: The Win/Win Alternative

Presenters: Ronald Leder, president of Cooper Leder Marketing,
Craig Garritano of JAT Software

With electronic distribution of Forms W-2, everyone involved in the process wins, according to the presenters of the American Payroll Association Congress’ workshop, “Providing Employees With E-Forms W-2.” Business is generally tradeoffs--what is to one person’s advantage is to another’s disadvantage--somebody wins, somebody else loses. So, it’s refreshing to find a business innovation that works to everyone’s advantage, as noted during the workshop.

Advantages of E-Forms W-2

Generally, an electronic distribution system allows an employee to access his or her W-2 information on a secure Web site. According to Ronald Leder, president of Cooper Leder Marketing, the advantages to the employer of providing an electronic rather than a paper Form W-2 to an employee are reduced costs, saved time, the almost complete elimination of reissues, and thus significantly lowered payroll department overhead. There are also real advantages to the employee, said Leder, including quicker receipt of the W-2, no chance of losing the form (since it’s always available online), and the ability to import the form directly into online Forms 1040.

There are standards employers must meet in providing electronic wage and tax information to employees, of course, but since the Internal Revenue Service is committed to increasing electronic tax processing, the service has made the requirements as little onerous to the employer as possible, while still protecting employee rights. First and most important, as Leder’s co-presenter Craig Garritano of JAT Software noted, the employee must consent to receiving his or her W-2 electronically. Mandated electronic receipt is not allowed--if the employee wants a paper W-2, the employee has the right to a paper W-2. Next, the employee must demonstrate his or her ability to access the electronic data (e.g., through a Web browser), must be notified when the data are posted, and must be able to access the data from Jan. 31 through Oct. 15 (or for 90 days after posting if that period ends after Oct. 15).

With all its advantages, the only hurdle to the widespread implementation of e-form W-2s is employee education, said Leder. As with direct deposit, an employee who understands the benefits of receiving his or her W-2 electronically is more than likely to sign up. Also following the direct deposit model, Leder recommends an aggressive employer marketing campaign to educate employees to the advantages of electronic tax information, including paycheck stuffers, newsletter articles, e-mail announcements, posters, and staff meetings. The financial advantages to the employer of increased employee participation in the e-form program combined with the boost in employee morale from the greater convenience of electronic forms will more than offset the expense of selling the idea.

By Richard Vollmar, CPP