Correcting an Incorrect W-2 and W-3
Using Form W-2c and How a New Deadline Affects Error Corrections
It's much easier to make corrections to W-2 forms before you file them with the Social Security Administration (SSA). If you didn't find the error before filing the form, here's some information that can help you figure out what to do.
IRS Form W-2 is used by employers to report annual income and the amounts of withholding to employees and to the Social Security Administration.
Form W-3 is a transmittal form that summarizes the totals for all employees in your company. It includes totals for all items on the W-2 form. You don't need the W-3 form if you are filing W-2s online.
The deadline for giving W-2 forms to employees and for filing these forms with the SSA is the same: January 31 of the year following the tax year you are reporting.
Since the date for giving W-2 forms to employees and filing with the Social Security Administration are the same. Try to get W-2 forms to your employees earlier in January if you want to allow them some time to review the forms and alert you to any errors before you file the forms with the SSA.
IRS Penalties for W-2 Errors
The IRS considers several different kinds of errors on W-2 and W-3 forms when determining penalties:
- Error due to a reasonable cause and not willful neglect. For example, something beyond your control might have happened (a computer calculation error, for example). In these cases, you must be able to show that you acted reasonably and took steps to avoid failure.
- Failure to include correct information. These errors relate to A Taxpayer ID Number, a payee's surname, and any money amounts.
- Inconsequential errors would be errors that don't prevent the SSA/IRS from processing the form.
- De minimis (small) errors in amounts.
Intentional disregard of the filing or correct information requirements has a penalty of $500 per W-2 form, with no maximum. Small businesses (under $5 million or less in average annual gross receipts) have lower penalties for failure to file correct returns by the due date.
If You Haven't yet Submitted Form W-2 to the SSA
Forms W-2c and W-3c are correction forms and must be submitted to the SSA if you need to make most changes to your W-2 forms. But an exception exists if you have not yet submitted the incorrect W-2 to the SSA.
In this case, you would not issue a Form W-2c to correct the mistake. Simply check "void" on Copy A of the original form, the copy that's sent to the SSA. Then create a new W-2 with the correct information.
Write "corrected" on the employee's copy of the new W-2 and give it to the person, and send the correct Copy A to the SSA.
Common W-2 Errors and How to Correct Them
Check the Instructions for W-2 and W-3 forms for details on correcting these errors and submitting corrections to the SSA.
Error in Employee Name
Complete Form W-2c only up through box "i" if you reported the employee's name or Social Security number correctly on a previous form but the name or SSN is incorrect this year. You don't have to complete the numbered boxes with wage and withholding information.
Simply redo the original W-2 and give it to the employee if this is the first time you've incorrectly reported his name or SSN. You'll also have to complete and submit Forms W-2c and W-3c if you've already sent the form to the SSA along with the W-3.
You cannot use the W-2c to add the information if the error is a missing employee name or SSN. You must contact the SSA directly with this problem at 1-800-772-6270.
Missing or Incorrect Business EIN
Make sure that the Employer ID Number (EIN) issued to you by the IRS is used on all of the W-2's you file. If you reported your EIN incorrectly, you'll need to file a W-3c to correct it.
Missing Dollar Amounts
All boxes on the W-2 form must show "0." Don't leave the box blank.
An Error in an Amount
Fill out the W-2c completely, showing the original and corrected amounts, if you made an error in an amount either for withholding or earnings. You might also have to file Form 941c if you incorrectly reported wages or withholding on a 941 - Employer's Quarterly Tax Statement.
Mistakes with Employer-Sponsored Health Coverage
You must report the cost of health care coverage for your employer-sponsored group health plan. This information appears in box 12 of the W-2 and it's coded "DD." It doesn't affect the employee's tax situation, but you must nonetheless submit form W-2c to correct any mistakes here, according to the IRS.
Mistakes with Retirement Contributions
Retirement plan information appears in box 13 of a W-2, and making a mistake here can cause all sorts of headaches for your employee. It can leave him open to audits, and you don't want this. Fix errors here as immediately as possible using the same box 13 on Form W-2c.
Additional Notes on Errors
If you paid wages to an employee in error, these wages are still taxable to the employee.
Don't use a W-2c to report corrections to an employee's back pay.
Some other common errors:
- Downloading Copy A of Form W-2 or W-3 from the internet. This downloaded form is not scannable and it won't be accepted by the IRS.
- Omitting the decimal point and cents from entries
- Making entries that are too small or too large.
- Adding dollar signs to money-amount boxes.
- Misformatting the employee's name in box e. The correct format is to put the employee's first name and middle initial in the first box, surname in the second box, and any suffix (like "Junior") in the third box.
- Entering an incorrect employer ID (EIN) or employee SSN for the SIN.
- Folding, cutting, or stapling Copy A paper forms mailed to the SSA.
- Mailing other forms or pages to the SSA.
Where to Get Form W-2c
You can buy the correct form on the IRS website, however, or at any reputable office supply store or website. Filing online will save you the trouble of getting thee forms.
Make sure you are ordering the correct form for the tax year. Order 2019 W-2 and W-3 forms for reporting employee information for 2019, even if you are completing the forms in 2020.
A Reminder About Late Filing and Penalties
Be sure to get your W-2s out to your employees by the due date and your W-3s transmitted to the SSA on time, including corrected versions, to avoid penalties for late distribution and filing.
Current penalty amounts:
- $50 for each W-2 corrected within 30 days of the due date,
- $110 if you file more than 30 days late and before August 1, and
- Up to $270 for each form if you wait until after August 1. This increases to $530 or 10 percent of any unreported amount if you don't address the situation at all.
Read the Instructions Carefully
This article is a general overview of these wage and tax statements. It is not intended to be comprehensive. Read the instructions found in the documents carefully before you complete a W-2c or W-3c.
IRS. "General Information for Forms W-2 and W-3." Penalties, Pages 13-14. Accessed Nov. 15, 2019.
IRS. "General Instructions for Forms W-2 and W-3." General Instructions for Forms W-2c and W-3c, Pages 24-25. Accessed Nov. 15, 2019.
IRS. "General Instructions for Forms W-2 and W-3." Common Errors on Forms W-2, Page 4. Accessed Nov. 15, 2019.
IRS. "General Instructions for Forms W-2 and W-3." Penalties, Page 13. Accessed Nov. 15, 2019.