As an employer, always set reminders so that the federal government does not hit you with a w2 late filing penalty. All employers must meet the Jan. 31 deadline for Form W-2. That means, you must furnish copies to employees, paper file, or E-file to the Social Security Administration. For new employers, Form W-2 serves as an annual payroll report. It shows the amount of taxes your company withheld from an employee’s annual paycheck. Once you send the reports, the Social Security Administration will use them to file federal and state taxes.
For a small business, incurring any late penalties can severely hurt or permanently sink the company. Below, small business owners can find details that will help avoid these types of penalties now and in the future.
What is the W2 Late Filing Penalty for Small Businesses?
The top responsibility as an employer is for you to send all W-2 forms to your employees on time. Then, you must file the reports to the Social Security Administration before the annual Form W-2 deadline. If you do not comply with the deadline, the Internal Revenue Service will issue heavy penalties. You will also need to pay a penalty if you send the wrong information.
If you miss the deadline for a W-2 tax form, the penalty you owe will vary. The penalty can range from $50 to $530 per missing form. The fee will increase based on the amount of time that has passed from the due date. Here is the w2 late filing penalty scale for small businesses:
$50 per return/$187,500 maximum – If you file the proper forms within 30 days of the deadline.
$110 per return/$536,000 maximum – If you file the forms in between 31 days of the deadline and Aug. 1.
$270 per return/$1,072,500 maximum – If you file the forms on or after Aug. 1.
$550 per return/No limitation – If you intentionally neglect to file your forms.
The IRS views small businesses as those who earned an average of $5 million or less for the past three tax years in annual revenue.
How to Avoid W-2 Penalties
One of the ways to potentially avoid W-2 late penalties is by requesting a 30-day extension. You can request an extension from the IRS by filing Form 8809. Make sure that you file the form with the IRS if you think that you will miss the due date. Keep in mind that the IRS will not guarantee an extension. It will only grant extensions for a catastrophe or extraordinary circumstances. File the form as early as possible between Jan. 1 and 31. You cannot request a second extension.
You can also avoid a w2 late filing penalty by using W-2/1099 Forms Filer software. Our AMS software includes a Common Payee File. Each user can select a payee across payers without re-entering the same information multiple times. The add-on module also lets users electronically file their year-end W-2 forms to the Social Security Administration in an efficient manner.