Employers must send a Form W-2, Wage and Tax Statement, to the Social Security Administration every year for all of their employees. But are there situations when employers can correct the form rather than submitting a Form W-2c when errors are found? The answer: Yes.
Corrections may be make to federal, state, or local income tax withholding amounts reported only if there is an administrative error, said Dan Dycus, CPP, senior director of education services for the American Payroll Association. An administrative error would occur if the employer withheld $500 from an employee but reported $600. In this instance, the employer must correct Form W-2 to reflect what was actually withheld, he said.
Employers may correct Form W-2 but need not complete Form W-2c, Corrected Wage and Tax Statement, if an error is found before Forms W-2 are filed with the government, assuming the electronic file to be submitted to the Social Security Administration cannot be changed, Dycus said May 20 during the APA’s annual Congress in Orlando, Fla. The employer must write “Corrected” on top of the paper Form W-2 copies except Copy A, which goes to SSA, he said. Although Form W-2c need not be completed, Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, may be required, he said.
Employers should create separate forms that employees would need to complete, sign, and date whenever they need to request replacement Form W-2s or corrections to the form, said Rosemarie Fraumeni, CPP, payroll manager for Presidio. If an employee requests a correction, the employer should have the employee indicate what’s wrong and attach supporting documents, Fraumeni said. Employers should include a schedule of when the forms will be processed, she said.
If a Form W-2 is returned to an employer after it was sent to the wrong address, the employer should make a copy of the returned envelope and incorrect address notice and keep them with year-end documents, Dycus said. The employer then should put the original Form W-2 and returned envelope in a new envelope with new address without having to complete Form W-2c, he said.
After an employee says that Form W-2 has been lost, the employer should reprint the form and indicate “Reissued Statement” on top of the paper copies given to the employee, Dycus said. This is not required by the Internal Revenue Service, but is a good practice, he said. If the employer sends a replacement form by email, it should encrypt the document, he said.
Employers may charge employees for issuing replacement forms, Dycus said, adding that it is surprising how employees are able to find their W-2s after they are told a fee is required for a replacement.
Form 941-X must be completed if there is a change in either federal wages or taxes, Fraumeni said. If no money is involved, such as a change of name or Box 12 code, or the employer is correcting Social Security numbers, no Form 941-X is needed, she said.
If an employer is correcting underreported taxes, “Form 941-X must be filed by the due date of Form 941 for the period in which the error was discovered,” Fraumeni said. If overreported taxes are being corrected, “Form 941-X is due before the period of limitations expires,” or within three years of the original Form 941 filing date or two years of the tax payment date, whichever is later, she said.
There are two processes on Form 941-X that employers can choose from: adjustment, which is used to apply a credit, or claim, which is used to file for a refund, Fraumeni said. Ninety days before the end of the period of limitations, employers can only choose the claim process, she said. An employer’s explanation of how corrections were determined should be brief and concise, she said.
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