As the IRS continues to update annual forms and their requirements, it can be a tricky task for businesses to stay up to speed with all of this information.
Form W-2 is a common tax statement that has undergone a few changes to this form over the past few years. The IRS released the latest version of this form earlier this year, so we’re providing you with an overview of what you need to know going forward this tax season.
This article provides an overview of Form W-2 for the 2023 tax year, complete with any IRS updates that your business should be aware of.
Before we delve into all the new updates about Form W-2, here is a quick overview of Form W-2 and its purpose.
Table of Contents
Overview of Form W-2
What is Form W-2?
Form W2, also called the “Wage and Tax Statement,” is an IRS informational tax statement used by employers to report the employee’s annual wage and tax withholding from the employee’s paycheck.
The Form W-2 reports information such as employee annual wages, Federal income tax, and FICA tax withheld from the employee’s paycheck, as well as other employee fringe benefits and more.
Who must File Form W-2?
Form W-2 must be filed by employers that have paid wages to employees and taxes withheld taxes from them throughout the year.
Businesses should complete and file Form W-2 either electronically or file paper copies with the SSA and for each employee before the deadline, i.e., January 31st. Employees use the information in Form W-2 to report their tax returns.
In the event that the deadline of January 31st falls on a Federal holiday or weekend, the deadline automatically moves to the next business day.
What are the different copies of Form W2?
There are several different copies of Form W-2. Each one serves a different purpose. It is important to ensure that the correct copies go to the intended recipient.
Copy A: This should be filed with the SSA.
Copy B: This should be distributed to the employee.
Copy C: This should be retained for employee records purposes
Copy D: This should be retained for employee record purposes.
Copy 1: This should be filed with the employee’s state, city, or local department if required.
Copy 2: This should be filed by the employee with their state, city, or local department if required.
You don’t need to provide Form W-2 to any independent contractors that your business paid during the year. However, this information should be reported on a separate Form 1099.
What is the information required to file Form W-2?
The following information is required to complete Form W-2
– Payer Information
– Recipient information
– Total amount of wages/ tips paid to each employee
– Total federal and state tax withheld for each employee
– Total medical and social security taxes withheld for each employee
– Other compensation and benefits
That being said, let’s look at the relevant updates to Form W-2.
What are the Changes in Form W-2 for the 2023 tax year?
Increased penalty charges
For the tax year 2022, the IRS made several changes to the W2 Form, one of the most notable of which is the increase in penalty rates. The IRS has stated that due to recent inflation, they have increased the penalty rate for Form W-2. The updated penalty charges below will apply to forms due to the IRS after December 2022.
If you failed to file before the deadline but filed within 30 days from the deadline, the IRS imposes penalties of $50/form. If you filed your form 30 days after the deadline but filed within August 1, the penalty amount is $110/form. If you filed your return after August 1st, then the IRS imposes a penalty of $290 per form.
W-2 Penalty Changes:
|Count of Days Late||Tax Year 2021||Tax Year 2022 and Beyond|
|Filed 30 days or less||“$50 per form, with an annual cap set at $556,500 (or $194,500 for businesses that are small).||$50 per form, with an annual penalty cap of $588,500 (or $206,000 for businesses that are small).|
|Filed past 30 days before August 1.||$110 per form, with an annual ceiling of $1,669,500 (or $556,500 for businesses that are small).||$110 per form, with an annual penalty ceiling of $1,766,000 (or $588,500 for businesses that are small).|
|Filed past August 1||$280 per form, with an annual limit of $3,339,000 (or $1,113,000 for business thar are small).||$290 per form, with an annual penalty capped at $3,532,500 (or $1,177,500 for businesses that are small).|
Form W-2 Updates to the Employer Section
The social security wage limit has been increased from $142,800 to $147,000 in the 2022 tax year. This means the total of box 3 (Social Security wages) and box 7 (Social Security tips) cannot exceed the threshold of $147,000.
However, there is no change in the household employee social security wage threshold: wages and tips must be equal to or greater than $2,400.00.
As the social security base has been increased, the social security tax withheld limit has been increased from $8,853.60 ($142,800 x 0.062) to $9,114.00 ($147,000 × 6.2%).
How To File Form W-2?
Form W-2 can be filed electronically or by mailing paper copies to the IRS. While you can download and complete Form W-2 from the IRS website and mail in copies, e-filing is a much easier option than the IRS prefers. It is also important to keep in mind that if you are filing 10 or more forms, you are required to e-file for your business.
If you plan to e-file, there are several options available, one of which is TaxBandits, an IRS-authorized, SOC 2 Certified e-file provider. TaxBandits supports Form W-2 as well as the 94x series, 1099 series, ACA Forms, and more.