How to Avoid W2 and W3 Form Errors

The fourth quarter of the tax year brings around the time to start preparing for end of the year wage reporting. Being organized and primed for this time of the year alleviates unnecessary last minute stress and mistakes. The IRS and SSA host a Small Business Seminar for both paper filers and/or electronic filers. Business owners should plan on attending the seminar for valuable information on reporting wages and taxes and to receive the latest electronic filing instructions.

SSA asked employers to abide by a few guidelines when generating W2 and W3 forms. Keep your entries inside the boxes, use dark ink, do not erase or use white out on the form they also do not require the dollar sign to be printed in the box.

W2 Box a – Employee’s nine digit Social Security number

W2 Box b – Employer’s nine digit identification number W2 Box e – Employee’s name as shown on Social Security card and address

W2 Box 1 – Regular wages, tips and compensation

 W2 Box 3 – Social Security wages, do not exceed maximum wages for the year

W2 Box 5 – Medicare wages, there is no limit on Medicare wages

W2 Box 7 – Tips paid W3 Box b – This box must always be completed W3 Box c – Show the total number of W2 forms included with this W3 form

W3 Boxes e, f, g – Position the label provided by the IRS in Publication No. 393 or enter EIN, employer’s name and employer’s address

W3 Box h – Show any other EIN number used during the tax year

This is a list of commonly used or required boxes on the W2 and W3 forms. Employers may be required to fill in additional boxes depending on their circumstances. Remember both the IRS and SSA websites can be very informative.

In October you can order W2 and W3 forms. You can order paper forms or W2/W3 form printing software. By November the IRS will mail tax forms and IRS Publication No. 393 with a label identifying you as an employer. The label includes employer’s name, address and EIN, affix the label over Boxes e, f, g on the W3 form. For employer’s that file electronically you will receive the Magnetic Media Reporting and Electronic Filing booklet (MMREF-1). Before December your employees should update their W-4 and W-5 (Earned Income Credit Advance Payment Certificate) forms.

Before you actually file your wage reports you should balance your 941 form to your W3 form for the tax year. Annual amounts from payroll records should match the total amounts reported on all 941 forms for the year; the total amounts reported on all 941 forms for the tax year should match the sum of the same data fields shown in the W3 totals. To help you with balancing your records the SSA has prepared two worksheets. The first is a worksheet for the W3 form, the second is a worksheet for the fourth quarter 941 form. If you would like to use the worksheets to help you match your total amounts you can request a paper copy of the Employer’s Guide from SSA.

Strictly adhering to IRS and SSA guidelines and filing dates is the number one way to avoid errors and fines. Payroll software that automatically calculates Federal, Medicare, Social Security taxes and populates W2/3 and 941 forms lessens the tendency to make manual calculation errors. Try a nice small business software: Payroll Mate