2021 is drawing to a close. For businesses and employers, this means year-end accounting and the W-2 filing is just around the corner. However, with frequent changes, changing deadlines, etc., staying compliant can seem like a daunting task.
Form W-2 is the salary and tax return that employers use to report wages paid to employees. These are the tax forms your employees need to file their annual income tax returns. W-2 compliance is very important this year, as there are some changes. Here’s what you need to know to stay on top of your W-2 compliance for the 2021 tax year.
At the start of each year, employers must send Copy A of Form W-2 to the Social Security Administration (SSA) to report wages paid and taxes collected for your employees during the previous calendar year. Employers should also send a copy of the W-2 to the employee.
Employers are required to file a W-2 form for wages paid to each employee including:
Income taxes, social security or health insurance have been withheld
Income tax would have been withheld if the employee had not claimed more than one payroll deduction allowance or had not claimed the withholding exemption on a Form W-4 (Certificate of Compensation employee’s withholding tax).
Employers must also report and file payroll taxes with the Internal Revenue Service (IRS) each quarter. Employers must report income and employment taxes withheld from their employees on a Quarterly Federal Employer Tax Return (Form 941) and file all of these taxes with an authorized bank or financial institution. in accordance with federal tax filing requirements. Employers are also responsible for filing a FUTA return each year and filing these taxes.
Important filing dates for employers
January 31, 2022 – Deadline to mail or distribute W-2s to employees.
January 31, 2022 – Salary declarations for the 2021 tax year must be filed with the Social Security Administration.
January 31, 2022 – If you are using independent contractors, you must send Form 1099-NEC to all contractors that you paid more than $ 600 in the 2021 tax year. You must send copy A of Form 1099-NEC to the IRS as well as a copy to the beneficiary. Compensation for independent contractors was previously reported on a 1099-MISC form prior to tax year 2020.
April 15, 2022 – Tax day for individuals. By this date you should have sent all of the W-2s, but keep this date in mind if you have submitted paper forms, as there are bound to be last minute filers who misplaced their copy or forgot to give you their change of address. Current or past employees can request a last minute copy, so be sure to keep a copy that you can mail or forward electronically.
Deferred social charges from 2020
In response to the coronavirus pandemic, the Treasury and IRS offered employers the option to defer the employee’s share of the social security tax from September 1, 2020 to December 31, 2020. This deferral applied to employees who earned less than $ 4000 per biweekly. pay period (or the equivalent threshold amount compared to other pay periods) pay period by pay period. If you deferred tax on your employees’ salaries in 2020, and if you collected this tax in 2021, you must send a W-2c to correct social security taxes for the 2020 tax year.
Human resources departments see an increase in these requests in early April before tax day.
Distribution of W-2 to employees
Many employers still send paper versions of Form W-2 by mail. If your business is in this boat, you may need to start looking at electronic options.
From 2022, if you send 100 or more W-2 forms, you must send them electronically. In 2023, this limit is lowered to 10 W-2 forms, which means that this rule will soon apply to the majority of employers. This information is shared by the SSA and is awaiting publication of the finalized IRS regulations.
Sending w-2 electronic forms to employees can also help reduce the workload on your human resources department. Each year, there are inevitably employees or former employees who forget to update their address and end up having to request a new sending of their tax returns. Electronic filing can prevent such requests or problems.
Whether you are mailing employee W-2 forms or submitting them online, be sure to distribute them before the January 31 deadline.
Submission of W-2s to SSA
The Social Security Administration has encouraged all employers to file their W-2 forms electronically for 2021. Filing electronically is an efficient option and you may need to use it. If you need to file at least 250 W-2 or W-2c forms for 2021, you need to file electronically. You can request a waiver of this requirement by submitting Form 8508 to the IRS at least 45 days before the January 31 due date for W-2s.
The Social Security Administration’s Business Services Online (BSO) service allows employers to file W-2 / W-2C forms online and verify employee legal names and social security numbers against SSA records .
The SSA BSO website gives you two options for filing W-2s:
If you need to complete 50 or fewer W-2 forms at a time, you can use BSO to create them online. BSO will walk you through the process of creating W-2 or W-2c forms. You can save and print them for sending to employees and submitting them to SSA electronically. It’s a great option for small and medium businesses.
If you need to file more than 50 W-2 forms or more than 25 W-2c forms, you can use the file upload feature in BSO instead to bulk upload completed W-2 forms.
You can also use BSO to check employee social security numbers in large batches for W-2s, or in smaller batches when hiring new staff.
Start preparing for the W-2 season now
January will be here before you know it, so start preparing for the W-2 season now. If you have not yet submitted an electronic file, set up your Business Services Online account on ssa.gov so that you are ready to enter your W-2s in January. Also decide how you will distribute the W-2s this year, especially if you plan to distribute them electronically for the first time this year.
It’s also a great idea to send out a reminder at the start of the New Year to encourage employees to update their mailing addresses if you plan to send hard copies of W-2 forms to your staff. This is especially important if your business has been operating remotely or has announced permanent remote options this year, and many remote workers have taken advantage of permanent remote working models to relocate.
And finally, don’t forget to mark your calendars so you don’t miss any important deadline!