We all know that if our W-2 forms are not correct, we are going to have problems when it comes time to file our tax returns. It is critical that the W-2 wage and tax statements you prepare and file for your employees are accurate. Mistakes made on an employee’s Form W-2 can cause a number of headaches for employers and employees… some of which an employer can be penalized for.
What are the Most Frequent Mistakes on W-2 Forms?
The Social Security Administration (SSA) discusses some of the most common mistakes made when preparing and filing W-2 forms in the SSA Publication… Employers’ Guide to Filing Timely and Accurate W-2 Wage Reports. Below are some excerpts from SSA Publication No. 16-004.
Incorrect or Missing Employer Identification Number (EIN)
The SSA and IRS maintain employer records by EIN. Reports received with erroneous EINs may be credited to the wrong record. Either missing or incorrect EINs may result in the IRS assessing penalties for failure to file correct reports. To avoid these errors, be sure that:
- Your reported EIN has nine digits and is displayed in this format: XX-XXXXXXX
- The EIN on your Form W-3 is the same as the EIN reported on your Form 941
Incorrect Employee Names and Social Security Numbers (SSNs)
The SSA cannot credit wage earnings to employee records unless the employee name and SSN on the W-2 wage report match the name and number in the SSA's files. When wages cannot be credited to an employee’s Social Security record, this could result in a potential loss of benefits for that employee. Gathering accurate information from an employee on their W-4 form can help employers avoid penalties for name and SSN mismatches.
Wage Reports for the Year After an Employee's Death
For Social Security and Medicare reporting, payments made on behalf of a deceased employee, after the year that employee dies, cannot be credited as wages for Social Security purposes. Such payments should be reported for the beneficiary or estate of the deceased employee on Form 1099-MISC (Miscellaneous Income) in box 3, “Other Income.”
Use of Titles and Abbreviations in Name Fields
The name fields of wage reports should not include any titles (Mr., Mrs., Dr., etc.), designation suffixes such as Jr., Sr., Rn., Esq. or abbreviations to designate the employee's position, title, company/division, etc. Titles in the employee name fields could prevent SSA from electronically identifying the employee for whom the wages are reported.
Failure to Complete the “Retirement Plan” Block of Form W-2
On Form W-2, the “Retirement Plan” block of Box 13 must be checked when the worker is an active participant in a retirement plan or a simplified employee pension plan maintained by the employer. Failure to make an entry when required can lead to income tax problems with the IRS for the worker.
Incorrect or Omitted Medicare Wages/Tips
Report Medicare wages/tips separately from any Social Security wages and tips. There is no limit to the wages/tips subject to Medicare tax, so all such earnings must be shown on Forms W-2 and W-3 wage reports.