10 Tips To Correctly Completed W-2s

18 Dec 10 Tips To Correctly Completed W-2s

The year-end is quickly approaching and January will bring a slew of payroll deadlines!  Top on the list is preparing payroll taxes returns including w-2s.  To avoid errors and penalties here are 10 Tips for completing your W-2s correctly.

  1. Make Sure Your Company Name and Federal EIN are Correct

Failure to use the exact EIN (employer identification number) and legal company name can result in a failure-to-file penalty and notices from the IRS regarding 941/w-2 reconciliation discrepancies.

  1. Are Your Employee Names, Social Security Numbers and Addresses Up-To-Date

Now is a great time to make sure you have the correct information from your employees.  The proper legal name, social security number and address will prevent w-2s from being questioned by the IRS or returned by the US Postal Service.

  1. Add S-Corp Shareholder Health and Accident Insurance Premiums to Box 1 (Wages) and Box 14 (Other) on the w-2

Shareholders owning 2% or more of an S-Corporation must have any health and accident insurance payments paid by the corporation included on their w-2.  The amount should be added to wages in Box 1, but would not be included in Boxes 3 or 5 of the w-2 form.  The payments must also be identified as such in Box 14 (Other).

  1. Report Taxable Third-Party Sick Pay

Third party administrators are required to provide employers a statement that includes taxable amounts paid and withholdings by January 15th.  If your employees received third party sick or disability pay those amounts should be reported in Box 1 (Wages), Box 4 (Social Security Taxable Wages) and Box 5 (Medicare Taxable Wages).  Any withholdings withheld by the third party reported in Box 2 (Federal Income Tax), Box 4 (Social Security withheld by third party), Box 6 (Medicare Tax Withheld).  Report amounts not included in Box 1 (because the employee contributed to the plan) are recorded in Box 12 with code J.

  1. Group Life Insurance over $50,000 are Taxable

Company paid group life insurance under $50,000 is exempt from payroll taxes.  The amount over $50,000 is taxable and subject to federal income tax, social security, and Medicare but not federal unemployment.  Report in Boxes 1, 3, 5 and 12 with a code C.  Plans that favor highly compensated employees require 100% of the group term life to be reported as income.

  1. Dependent Care Benefits over $5,000 are Taxable

Your employees are not taxed for up to $5,000 a year of employer on-site day care, cash or employee contributions to a dependent-care flexible savings account.  Report the entire amount of the benefit in Box 10 and the amounts over $5,000 in Boxes 1 and 3 (up to the Social Security Wage limit) and Box 5.

  1. Include Company Paid Retirement Plans on W-2

If your company provides a retirement plan for your employees it must be reported on the w-2.  For Company paid SEP plans the contributions are not reported as wages but are recorded in Box 12.  For 401(k) and Simple IRA plans the contributions are not included in Box 1 (Wages) but would be included in SS Wages and Medicare Wages (Boxes 3 and 5).  Roth contributions are recorded in Boxes 1, 3 and 5 as they are after tax contributions.

  1. Company Paid Group Health Plan Costs are Reportable on the W-2

Report all employer health plan costs in Box 12.  Amounts paid by the company are not taxable wages and are not subject to federal income taxes, social security, medicare or unemployment taxes.

  1. Properly Report Tips

Tips should be reported in Box 1, 3 and 5 unless the tips are allocated.  Allocated tips are not taxable and should not be reported.  If FICA was not withheld from the tips then report in Boxes 1, 3 and 5 but include the uncollected Social Security in Box 12 with code A and the uncollected Medicare with code B.

  1. File on time

W-2s with accompanying W-3 must be filed by January 31st.  This includes distribution to employees.


There are many more fringe benefits that may need to be reported on your employee’s w-2.  Be sure to check the IRS website, www.irs.gov, for complete information.  TBooks is happy to answer any question you have about your accounting, bookkeeping and payroll needs.  You can call us at 410-618-1111 or email at support@TBooks.com

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