What Happens if a Company Misses the W2 Deadline?
When your business is growing and you decide it’s time to hire employees, it’s also time to familiarize yourself with W-2 filing requirements. The W-2 is required by the federal government to report the annual wages you pay to employees and the variety of taxes that you’re obligated to withhold. A W-2 isn’t necessary in some situations, but if it is and you miss the filing deadline, the financial consequences can be fairly severe.
When you provide an employee with total annual compensation of $600 or more that is subject to income tax, Social Security tax or Medicare tax withholding, you need to prepare a W-2 for that employee. However, if an employee’s level of compensation satisfies the $600 threshold and isn’t subject to Medicare or Social Security tax withholding, a W-2 is still required even if no income tax withholding was necessary if the only reason was because the employee reported more than one allowance on her W-4.
Once you determine which employees you’re responsible for filing W-2 forms for, you should keep in mind two separate filing deadlines. You must provide a complete and accurate copy of the W-2 form to each employee by Jan. 31, meaning you only have one month after the relevant tax year to prepare the forms. A second copy of the W-2 must be filed with the Social Security Administration (SSA) no later than the last day of February when filing by mail. However, if you file your W-2s electronically, you have until April 1. If you miss either of these deadlines, you may be subject to monetary penalties.
For every W-2 that you fail to file with the SSA, or file incorrectly, you will be subject to a $30 penalty if you file a correct copy no later than the 30 days after the deadline. The penalty increases to $60 for W-2s that are more than 30 days late but which you file by Aug. 1. And if you don’t file an accurate W-2 at all or do so after Aug. 1, the penalty increases again to $100. In situations where it’s determined that the missed deadline was caused by willful neglect or an intentional disregard of the law, the penalty becomes $250 for each W-2. To avoid paying the penalty, you’ll need to show that you had reasonable cause, meaning it was impossible for you to file by the deadline — not just inconvenient.
Separate penalties exist for failing to furnish each employee a copy of his W-2 by Jan. 31. Noncompliance also includes furnishing a W-2 that lacks the required information or that reports incorrect information. If you’re subject to these penalties, they are in addition to, and exactly the same as, the penalties for missing the SSA deadlines. However, minor or inconsequential errors or omissions will not subject you to the penalty, but keep in mind that reporting incorrect dollar amounts on a W-2 is never inconsequential.