Instructions For Forms W-2 And W-3 - 2010 (Page 7 of 15) in pdf

during the current year and the amount (if any) related to prior

can find Rev. Proc. 96-57 on page 14 of Internal Revenue

years. This information will help the employee account for such

Bulletin 1996-53 at

repayments on his or her federal income tax return.

Get Schedule D (Form 941), Report of Discrepancies

If the repayment was for a prior year, you must file Form

TIP

Caused by Acquisitions, Statutory Mergers, or

W-2c with the SSA to correct only social security and Medicare

Consolidations, for information on reconciling wages

wages and taxes. Do not correct “Wages” in box 1 on Form

and taxes reported on Forms W-2 with amounts reported on

W-2c for the amount paid in error. For information on reporting

Forms 941, Form 943, or Form 944.

adjustments to Form 941, Form 943, or Form 944, see section

Uniformed Services Employment and Reemployment

13 of Pub. 15 (Circular E) or section 9 of Pub. 51 (Circular A).

Rights Act of 1994 (USERRA) makeup amounts to a

pension plan. If an employee returned to your employment

Tell your employee that the wages paid in error in a prior

after military service and certain makeup amounts were

TIP

year remain taxable to him or her for that year. This is

contributed to a pension plan for a prior year(s) under the

because the employee received and had use of those

USERRA, report the prior year contributions separately in box

funds during that year. The employee is not entitled to file an

12. See the TIP before Code D on page 11. You also may

amended return (Form 1040X) to recover the income tax on

report certain makeup amounts in box 14. See Box 14 — Other

these wages. Instead, the employee is entitled to a deduction

on page 13.

(or a credit, in some cases) for the repaid wages on his or her

Form 1040 for the year of repayment.

Instead of reporting in box 12 (or box 14), you may choose

to provide a separate statement to your employee showing

Scholarship and fellowship grants. Give a Form W-2 to

USERRA makeup contributions. The statement must identify

each recipient of a scholarship or fellowship grant only if you

the type of plan, the year(s) to which the contributions relate,

are reporting amounts includible in income under section 117(c)

and the amount contributed for each year.

(relating to payments for teaching, research, or other services

required as a condition for receiving the qualified scholarship).

Penalties

Also see Pub. 15-A and Pub. 970. These payments are subject

to federal income tax withholding. However, their taxability for

The following penalties generally apply to the person required

social security and Medicare taxes depends on the nature of

to file Form W-2. The penalties apply to paper filers as well as

the employment and the status of the organization. See

to electronic filers.

Students in section 15 of Pub. 15 (Circular E).

Use of a reporting agent or other third-party payroll

Sick pay. If you had employees who received sick pay in 2010

service provider does not relieve an employer of the

from an insurance company or other third-party payer and the

responsibility to ensure that Forms W-2 are furnished to

CAUTION

third party notified you of the amount of sick pay involved, you

employees and are filed correctly and on time.

may be required to report the information on the employees’

Failure to file correct information returns by the due date.

Forms W-2. If the insurance company or other third-party payer

If you fail to file a correct Form W-2 by the due date and cannot

did not notify you in a timely manner about the sick pay

show reasonable cause, you may be subject to a penalty as

payments, it must prepare Forms W-2 and W-3 for your

provided under section 6721. The penalty applies if you:

employees showing the sick pay. For specific reporting

•

Fail to file timely,

instructions, see Sick Pay Reporting in section 6 of Pub. 15-A.

•

Fail to include all information required to be shown on

SIMPLE retirement account. An employee’s salary reduction

Form W-2,

•

contributions to a SIMPLE (savings incentive match plan for

Include incorrect information on Form W-2,

•

employees) retirement account are not subject to federal

File on paper when you were required to file electronically,

•

income tax withholding but are subject to social security,

Report an incorrect TIN,

•

Medicare, and railroad retirement taxes. Do not include an

Fail to report a TIN, or

•

employee’s contribution in box 1 but do include it in boxes 3

Fail to file paper Forms W-2 that are machine readable.

and 5. An employee’s total contribution also must be included in

The amount of the penalty is based on when you file the

box 12 with code D or S.

correct Form W-2. The penalty is:

•

An employer’s matching or nonelective contribution to an

$15 per Form W-2 if you correctly file within 30 days (by

employee’s SIMPLE is not subject to federal income tax

March 30 if the due date is February 28); maximum penalty

withholding or social security, Medicare, or railroad retirement

$75,000 per year ($25,000 for small businesses, defined on

taxes and is not to be shown on Form W-2.

page 8).

•

$30 per Form W-2 if you correctly file more than 30 days after

For more information on SIMPLE retirement accounts, see

the due date but by August 1, 2011; maximum penalty

Notice 98-4, 1998-1 C.B. 269. You can find Notice 98-4 on

$150,000 per year ($50,000 for small businesses).

page 25 of Internal Revenue Bulletin 1998-2 at

•

$50 per Form W-2 if you file after August 1, 2011, or you do

pub/irs-irbs/irb98-02.pdf.

not file required Forms W-2; maximum penalty $250,000 per

Successor/predecessor employers. If you buy or sell a

year ($100,000 for small businesses).

business during the year, see Rev. Proc. 2004-53 for

If you do not file corrections and you do not meet any of

information on who must file Forms W-2 and employment tax

the exceptions to the penalty stated below, the penalty

returns. You can find Rev. Proc. 2004-53 on page 320 of

is $50 per information return.

Internal Revenue Bulletin 2004-34 at pub/irs-irbs/

CAUTION

irb04-34.pdf.

Exceptions to the penalty. The following are exceptions to

Terminating a business. If you terminate your business, you

the failure to file correct information returns penalty:

must provide Forms W-2 to your employees for the calendar

1. The penalty will not apply to any failure that you can

year of termination by the due date of your final Form 941. You

show was due to reasonable cause and not to willful neglect. In

also must file Forms W-2 with the SSA by the last day of the

general, you must be able to show that your failure was due to

month that follows the due date of your final Form 941. If filing

an event beyond your control or due to significant mitigating

on paper, make sure you obtain Forms W-2 and W-3 preprinted

factors. You must also be able to show that you acted in a

with the correct year. If filing electronically, make sure your

responsible manner and took steps to avoid the failure.

software has been updated for the current tax year.

2. An inconsequential error or omission is not considered a

However, if any of your employees are immediately

failure to include correct information. An inconsequential error

employed by a successor employer, see Successor/

or omission does not prevent or hinder the SSA/IRS from

predecessor employers above. Also, see Rev. Proc. 96-57,

processing the Form W-2, from correlating the information

1996-2 C.B. 389, for information on automatic extensions for

required to be shown on the form with the information shown on

furnishing Forms W-2 to employees and filing Forms W-2. You

the payee’s tax return, or from otherwise putting the form to its

-7-

Instructions for Forms W-2 and W-3 (2010)

Instructions For Forms W-2 And W-3 - 2010 Page 7

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