Small-business tax requirements are a nightmare for many owners because of the complexity of the tax code. However, filing W-2s is a simple process. Although the form includes several copies, including one for the state, it is up to each state whether it requires a W-2 or has a state-specific form.
Employers use Form W-2 to report wages and withholding to the Social Security Administration, employees and some state and local governments. The W-2 is the only form that reports your employees’ Medicare and Social Security wages. It is imperative that you fill it out accurately and file it on time, according to the Internal Revenue Service. You must complete a W-2 for all employees who receive cash or noncash payments from you totaling $600 or more in a year.
As of publication, you must send Copy 1 of Form W-2 to the state unless your employee lives in Alaska, California, Florida, Iowa, Nevada, New Hampshire, New York, Oklahoma, South Dakota, Tennessee, Texas, Washington or Wyoming. These states either have state specific forms or do not have a state income tax. The states that do require you to file a W-2 vary in their deadlines for receiving the form. For example, if your employee lives in Kentucky, you must file Copy 1 by January 31. If your employee lives in Colorado, you must file it by March 31.
Although the IRS encourages all employers to file W-2s electronically, if you have fewer than 250 forms, you can file paper copies. If you make an error on a paper form, you must start over. The IRS requires that Copy A have no errors and does not allow white out, cross outs or erasures. You must type the forms. Although not required, the IRS prefers 12-point Courier font. Leave boxes blank if they don’t apply to your employee and write numbers without commas or dollar signs. Include two numbers after the decimal place. For example, instead of $37,892.90 write 37892.90.
States that require W-2s penalize employers who do not send a properly completed form on time. Montana fines employers $5 for each late W-2 received with a minimum fine of $50. If the state has its own form instead of requiring a W-2, contact the Department of Revenue to learn what the name of the form is and where to get one. If you find an error after filing a W-2, you must submit Form W-2C to the state.
