Instructions For Forms W-2 And W-3 - Wage And Tax Statement And Transmittal Of Wage And Tax Statements - 2016 Page 13
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32Penalties
1. The penalty will not apply to any failure that you can
show was due to reasonable cause and not to willful
The following penalties apply to the person or employer
neglect. In general, you must be able to show that your
required to file Form W-2. The penalties apply to both
failure was due to an event beyond your control or due to
paper filers and e-filers.
significant mitigating factors. You also must be able to
show that you acted in a responsible manner and took
Employers are responsible for ensuring that
steps to avoid the failure.
Forms W-2 are furnished to employees and that
!
Forms W-2 and W-3 are filed with the SSA
2. An inconsequential error or omission is not
CAUTION
correctly and on time, even if the employer contracts with
considered a failure to include correct information. An
a third party to perform these acts. The IRS strongly
inconsequential error or omission does not prevent or
suggests that the employer's address, not the third party's
hinder the SSA/IRS from processing the Form W-2, from
address, be the address on record with the IRS. This will
correlating the information required to be shown on the
ensure that you remain informed of tax matters involving
form with the information shown on the payee's tax return,
your business because the IRS will correspond to the
or from otherwise putting the form to its intended use.
employer's address of record if there are any issues with
Errors and omissions that are never inconsequential are
an account. If you choose to outsource any of your payroll
those relating to:
and related tax duties (that is, withholding, reporting, and
A TIN,
paying over social security, Medicare, FUTA, and income
A payee's surname, and
taxes) to a third party payer, visit IRS.gov and enter
Any money amounts.
“outsourcing payroll duties” in the search box for helpful
3. De minimis rule for corrections. Even though you
information on this topic.
cannot show reasonable cause, the penalty for failure to
file correct Forms W-2 will not apply to a certain number of
Failure to file correct information returns by the due
returns if you:
date. If you fail to file a correct Form W-2 by the due date
Filed those Forms W-2 on or before the required filing
and cannot show reasonable cause, you may be subject
date,
to a penalty as provided under section 6721. The penalty
Either failed to include all of the information required on
applies if you:
the form or included incorrect information, and
Fail to file timely,
Filed corrections of these forms by August 1.
Fail to include all information required to be shown on
Form W-2,
If you meet all of the de minimis rule conditions, the
Include incorrect information on Form W-2,
penalty for filing incorrect information returns (including
Form W-2) will not apply to the greater of 10 information
File on paper forms when you are required to e-file,
returns (including Form W-2) or one-half of 1% of the total
Report an incorrect TIN,
number of information returns (including Form W-2) that
Fail to report a TIN, or
you are required to file for the calendar year.
Fail to file paper Forms W-2 that are machine readable.
4. Forms W-2 with incorrect dollar amounts may fall
The amount of the penalty is based on when you file
under a safe harbor for certain de minimis errors. The safe
the correct Form W-2. Penalties are indexed for inflation.
harbor applies if no single amount in error differs from the
The penalty amounts shown below apply for tax years
correct amount by more than $100 and no single amount
beginning in 2016. The penalty is:
reported for tax withheld differs from the correct amount
$50 per Form W-2 if you correctly file within 30 days of
by more than $25.
the due date (for example, by February 28 if the due date
is January 31); the maximum penalty is $532,000 per year
If the safe harbor applies, you will not have to correct
($186,000 for small businesses, defined in Small
the Form W-2 and it will be treated as having been filed
businesses).
with all of the correct required information. However, the
safe harbor does not apply if the payee elects to have you
$100 per Form W-2 if you correctly file more than 30
issue a corrected return.
days after the due date but by August 1; the maximum
penalty is $1,596,500 per year ($532,000 for small
Small businesses. For purposes of the lower
businesses).
maximum penalties shown in Failure to file correct
$260 per Form W-2 if you file after August 1, do not file
information returns by the due date, you are a small
corrections, or do not file required Forms W-2; the
business if your average annual gross receipts for the 3
maximum penalty is $3,193,000 per year ($1,064,000 for
most recent tax years (or for the period that you were in
small businesses).
existence, if shorter) ending before the calendar year in
which the Forms W-2 were due are $5 million or less.
If you do not file corrections and you do not meet
any of the exceptions to the penalty, the penalty
Intentional disregard of filing requirements. If any
!
is $260 per information return. The maximum
failure to timely file a correct Form W-2 is due to
CAUTION
penalty is $3,193,000 per year ($1,064,000 for small
intentional disregard of the filing or correct information
businesses).
requirements, the penalty is at least $530 per Form W-2
with no maximum penalty.
Exceptions to the penalty. The following are
Failure to furnish correct payee statements. If you fail
exceptions to the failure to file correct information returns
to provide correct payee statements (Forms W-2) to your
penalty.
employees and cannot show reasonable cause, you may
be subject to a penalty as provided under section 6722.
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General Instructions for Forms W-2 and W-3 (2016)
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