All sorts of things can prevent employers from delivering W-2s by the Jan. 31 deadline, but taking these five steps will keep disasters – and penalties – at bay.
1. Double-check you’ve entered into your system items such as group-term life insurance, personal use of company cars, educational assistance, YTD corrections and manual checks.
Why: If you don’t enter these adjustments for processing during the last regular payroll run, you may not withhold any applicable taxes. (And who wants to fix those errors?)
2. Check paper W-2s when they arrive (if you’re printing in-house and haven’t already) to make sure employee instructions meet IRS’ requirements. Double-check that the Earned Income Credit Notification appears on the back of Copy B or C.
Why: You won’t be scrambling to get your vendor to send new forms (or print them yourself) at the 11th hour. IRS requires employers to give workers this notification, and printing on the reverse side of the W-2 is usually the easiest and most cost-effective measure.
3. Inform the mailroom of when you plan to mail W-2s.
Why: Staff there will need to know what to do with undeliverable or returned forms. Plus, if you’re mailing in-house, you’ll ensure there’s enough postage available on your mail date.
4. Design and print a report listing employees with no Social Security Number or address, so you can investigate and make corrections.
Why: You may face no-match letters or other compliance problems if you don’t clear up problems.
5. Ask your Accounts Payable people about payments made to employees that require W-2 reporting (e.g., nonaccountable plan reimbursements, taxable company-paid travel such as management retreats, etc.).
Why: These amounts may require income and employment tax withholding when processed, or even gross-up if your employer’s paying the employee’s taxes.
Source: American Payroll Association’s “Preparing for Year-End” seminar.
