As you think about the tax year ending, some of the important considerations on your mind might be:
- Tax returns and W-2 preparation
- Applicable ACA reporting
- Missing tax identification numbers
- Missing employee information
- Fringe benefits
- Shorter processing periods
- Alternative package delivery methods
It’s a long list, and there’s reason to be preoccupied with getting it all done and double checked.
Employers must file W-2 forms with the Social Security Administration (SSA) by January 31. You're also obligated to file any 1099 and 1095 forms with the Internal Revenue Service (IRS). If you do end up filing W-2s with missing or incorrect Social Security numbers or employee names, the potential IRS penalties can really add up:
- $50 per Form W-2 if you correctly file within 30 days of the due date
- Maximum penalty of $194,000 for small businesses
- $110 per Form W-2 if you correctly file more than 30 days after the due date but by August 1, 2020
- Maximum penalty of $556,500 for small businesses
- $270 per Form W-2 if you correctly file after August 1, 2020, or you do not file the required Forms W-2
- Maximum penalty of $1,113,000 per year for small businesses
Before you get too worried about what could go wrong, take a deep breath. As long as you have a plan in place and the appropriate resources to follow through with it, you can have a smooth year-end experience.
Above all, the top priority on your list to avoid potential W-2 filing errors has to be auditing your employee data. Confirm the following information is complete and accurate for each employee:
- First and last name
- Social Security number
- Address, city, state and zip code
If you’re still feeling concerned about the many other important tasks that need to be completed as part of year-end preparation, outsourcing your payroll could be a viable option. You’ll receive action items, reminders and assistance far in advance to ensure your year-end is processed in a seamless and timely manner.