As a small business owner, you need to be aware of the new W-2 deadline during tax season. The Protecting Americans From Tax Hikes (PATH) Act of 2015 established a much earlier filing deadline, which will affect your 2016 return. Here are five things you should know in order to remain compliant.
1. The SSA W-2 Deadline Is Now in January
According to the IRS, you now need to submit all copies of Form W-2 to the Social Security Administration (SSA) by January 31. In the past, employers usually had until the end of February or March to submit these forms, depending on whether they filed on paper or electronically. Now, the deadline is January 31, 2017, regardless of whether you are submitting paper or electronic forms.
2. Many States Have Adopted the New Deadline
As of July 2016, 20 states, Washington D.C. and Puerto Rico had moved up their W-2 deadline to the federal deadline of January 31. In order to remain compliant, you should check in with your state's tax department for more information regarding your deadlines.
3. 1099-MISC Forms Are Also Due Earlier
If you hire any independent contractors, the 1099 deadline has also been moved up to January 31. According to the IRS, you have to file a 1099 form for every contractor to whom you paid more than $600 in 2016.
4. Penalties Have Gone Up for Late and Incorrect W-2s
If you miss the W-2 deadline or submit forms with incorrect information, you are charged a penalty. And the new government law has increased the penalty for late or incorrect W-2s. According to the IRS, the amount of the penalty is based on when you file the correct W-2:
- Less than 30 days = $50 per W-2
- More than 30 days but before August 1 = $100 per W-2
- After August 1 = $260 per W-2
You and your payroll department should start preparing your W-2s as soon as possible to avoid these costly penalties. During the year, you should also compare your payroll information with your Form 941 so that you can catch any reporting discrepancies as early as possible. Form 941 reports your tax withholding to the IRS every quarter; the information on this form should match that which you report on your W-2s.
5. There Are Specific Cases in Which You Will Not Have to Correct a Reporting Mistake
If you misreport the amount of tax withheld for an employee by a minimal dollar amount, you may fall under a safe harbor. According to the IRS, "The safe harbor applies if no single amount in error differs from the correct amount by more than $100 and no single amount reported for tax withheld differs from the correct amount by more than $25." If your mistake falls under the safe harbor, you will not be required to correct the W-2 form. If you have made a larger mistake, you will need to file the correct information by the due date in order to avoid a fine.
By getting your paperwork in order now, you can help ensure that you and your team are compliant with the new W-2 deadline.