What Is the Penalty for Sending W2 Late?
Understand the financial repercussions and IRS guidelines for employers who submit W2 forms after their due date. Navigate potential liabilities effectively.
Form W-2, Wage and Tax Statement, details an employee’s annual wages and the amount of income, Social Security, and Medicare taxes withheld by their employer. This form is essential for employees to accurately file their individual income tax returns. For tax authorities, the W-2 provides vital information for verifying reported income. Accurate and timely filing of these forms by employers is important to ensure compliance with federal tax regulations.
W2 Filing Deadlines
Employers are generally required to furnish copies of Form W-2 to their employees by January 31st each year. This deadline ensures employees have the necessary information to prepare their tax returns well in advance of the April tax filing deadline. Employers must also file these W-2 forms, along with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA) by January 31st. This unified deadline applies regardless of whether the forms are submitted by paper or electronically.
If the January 31st deadline falls on a weekend or a federal holiday, the due date automatically shifts to the next business day. Failing to meet these deadlines can trigger penalties for the employer. While extensions for filing with the SSA can be requested using Form 8809, such extensions are not automatically granted and typically require specific circumstances.
Understanding Late Filing Penalties
Penalties are assessed for W-2 forms that are filed late with the Social Security Administration (SSA) or contain incorrect information. The specific penalty amount depends on how late the forms are filed, following a tiered structure.
For forms filed within 30 days after the January 31st due date, the penalty is $60 per form. If forms are filed more than 30 days late but on or before August 1st, the penalty increases to $120 per form. For forms filed on or after August 1st, or not at all, the penalty rises to $310 per form. These per-form penalty amounts mean that even a slight delay can result in substantial fines for businesses with many employees.
Calculating Penalty Amounts
The total penalty for late W-2 filings is determined by multiplying the applicable per-form penalty rate by the total number of forms submitted late. For instance, if an employer files 100 W-2 forms 45 days late (falling into the second tier), the total penalty would be 100 forms multiplied by the $120 per-form penalty.
Maximum penalty limits apply to businesses, varying based on their gross receipts. For smaller businesses, defined as those with average annual gross receipts of $5 million or less over the three most recent tax years, these caps are lower than for larger entities. For example, for forms filed within 30 days, the maximum penalty for a small business can be around $239,000, escalating for longer delays.
A significantly higher penalty applies in cases of intentional disregard of filing requirements. If the Internal Revenue Service (IRS) determines that an employer willfully failed to file or filed incorrect W-2s, the penalty is $630 per form, with no maximum limit. Intentional disregard implies a knowing or willful failure to comply, and such penalties are much more severe than those for unintentional errors or delays.
Seeking Penalty Relief
Employers may obtain relief from penalties by demonstrating “reasonable cause” for late filing. Reasonable cause is determined case-by-case, requiring the employer to show they exercised ordinary business care and prudence but were still unable to meet tax obligations. Examples of reasonable cause include natural disasters, such as fires or floods, or unforeseen events like the death or serious illness of the sole proprietor or a key individual responsible for tax compliance. An inability to obtain records due to circumstances beyond the employer’s control can also be a valid reason.
To request penalty abatement, employers should respond promptly to any penalty notice from the IRS. The request must be in writing and include a detailed explanation of the circumstances that led to the late filing, along with supporting documentation. This documentation might include police reports for theft, medical records for illness, or official declarations of a disaster area. A clear, well-supported explanation is important for the IRS to consider the request.