There are several important deadlines during tax season. There are deadlines for employers to follow regarding the preparation of necessary employee tax forms, and for employees to follow when filing their taxes. Workers cannot file their taxes properly if they don’t have the necessary forms or if certain forms aren’t filed on their behalf. If employers drop the ball with forms necessary for proper federal withholding, it creates a chain reaction.
The IRS utilizes penalties as a disincentive. Penalties keep employers accountable, which allows workers to fulfill their tax time duties in a timely manner. Here’s what you need to know about potential penalties for employers not sending W2 forms on time and how Mosey can help you stay on track with tax compliance.
What Is a W-2?
The Form W-2 Wage and Tax Statement is a form created for each employee that shows their wages and total contributions to income tax, medicare tax, and Social Security tax. The IRS uses form W-2 for verification purposes. The amounts on a W-2 should perfectly match those on payroll documents and other tax documents that businesses and workers need when they file their tax returns.
A W-2 form should also detail contributions to or from employer-sponsored health insurance, health savings accounts (HSA), flexible spending accounts (FSA), adoption or fertility assistance, dependent care, tuition assistance, and similar employee resources.
The W-2 is always prepared by the employer rather than the employee. The IRS must receive a W-2 form for every worker before a worker can file their tax return, and employees are entitled to a copy of their W-2 for tax preparation purposes. These documents are co-dependent upon each other.
Who Needs a W-2?
Form W-2 is only for employees who have earned at least $600 in one year. A W-2 is also required for family businesses where the employees are all related by blood or marriage. This means that even if your teenage child works for the family business, they’ll need a W-2.
Employees who earned $599 or less won’t need a W-2. Independent contractors, outside consultants, and gig workers won’t need a W-2. They’re responsible for making their own tax contributions and should be able to complete their taxes completely independently.
You won’t need to file a W-2 as a sole proprietor or a single-member LLC with no employees. If all of the revenue from your business is distributed to you and you alone, you aren’t considered an employer. You’ll only need to provide W-2-related information for yourself.
If you temporarily seek professional assistance from other people for specialty work without formally onboarding them (i.e., someone you hired to build your website as a one-time project or a graphic designer you occasionally contact for things like business card designs), they will be considered independent contractors.
What Are the W-2 Deadlines?
Employers must accurately complete and submit W-2 forms for all workers to the IRS and the Social Security Administration (SSA) by no later than January 31. It’s okay if the IRS and employees receive them a few days later than January 31 as long as the postmark on a physical copy of a W-2 form is not dated later.
Many companies find that electronic forms are easier and more cost-effective. The IRS will need a physical copy of the form in some cases, but e-filing may be available to you, depending on the nature of your business.
Your employees may prefer electronic tax forms, and it’s always acceptable for them to opt in for paperless taxes if they choose. You can make digital versions of completed W-2 forms available to employees no later than January 31.
If you’re running late, you can file for an extension with the IRS using Form 8809. An extension will grant you 30 extra days to produce W-2s. Note that you must have an acceptable reason for requesting an extension.
If one of the following reasons does not apply to you, you won’t be granted an extension:
The filer suffered a catastrophic event in a federally declared disaster area that made the filer unable to resume operations or made necessary records unavailable
Death, serious illness, or unavoidable absence of the individual responsible for filing the information returns affected the operation of the filer
Fire, casualty, or natural disaster affected the operation of the filer
The filer was in the first year of establishment
The filer did not receive data on a payee statement such as Schedule K-1, Form 1042-S, or the statement of sick pay required under section 31.6051-3(a)(1) in time to prepare an accurate information return
If you cannot provide proof of the legitimacy of your reason for filing late, you’ll still be required to pay a penalty for failing to file W-2 forms on time. It’s better to file for an extension and not need it than it is to need one and not have it.
If there is any chance that your filing will be late as a result of a recognized valid reason, file for an extension immediately and continue completing your W-2s as soon as possible.
What Is the Penalty for an Employer Not Sending W2 Forms?
The penalty for an employer not sending a W2 form on time is usually a fine. Fines often go up each year, with 2024 penalties higher than penalties in previous years. You should always check the IRS for the latest guidance on penalty fees:
- Late 30 Days or Less: $60
- Late 31 Days Through August 1: $120
- Late After August 1 or Never Filed: $310
- Intentionally Disregarded W-2 Forms: $630
These penalties are not all-inclusive penalties — they are separate for each W-2 an employer has failed to file. If you have 30 employees that you did not file W-2 forms for, you will pay 30 separate fines. If you’re 20 days late without a valid extension on 30 separate W-2 forms, your total will be $1,800 in fines.
“Intentional disregard” can be interpreted in a number of ways, but it’s ultimately up to the IRS to determine if you intentionally disregarded your W-2 forms. If August passes and you haven’t corresponded with the IRS about your W-2 forms and cannot produce proof that they’re in progress or completed, the IRS can declare your noncompliance to be an act of intentional disregard.
Intentional disregard can also refer to acts where employers attempt to disguise other labor or tax compliance issues by deliberately not providing the IRS with W-2 forms that could be damaging evidence. In such cases, employers are likely to face other civil or criminal penalties in addition to W-2 filing penalties.
There are usually maximum penalties for small businesses. The IRS defines a small business as any business with an average revenue of $5 million or less across the past three tax years. If your business usually makes $5 million or less per year, there may be a ceiling on your penalty liability.
How To Avoid a Penalty for an Employer Not Sending a W-2
The IRS is very strict when imposing penalties. There is no way to avoid a penalty unless you meet the criteria to file for an extension and complete your W-2 within the extended timeframe. W-2 completion is a serious compliance concern, and the only way to avoid penalties is to be sure you file in a timely manner.
Staying ahead of track and closely managing state compliance issues can help to prevent obstacles like penalties for late filing. It’s important to watch the rules and regulations that impact your ability to conduct business. Consider working with your HR team to create a compliance policy that favors early completion of key requirements.
Staying Compliant with Mosey
Non-compliance can cause serious business complications, including hefty fines and interruptions to operations. Business owners have a lot of work to do, and it can be difficult to simultaneously manage a laundry list of requirements for keeping your business operating above board. Let Mosey make things easier.
Mosey’s compliance management platform is designed to help business owners and HR professionals stay on track and keep track of key state compliance requirements. While you’re running your day-to-day operations, Mosey works in the background to assist you with compliance requirements.
Schedule a demo with Mosey to learn how we can keep you on the right track.
