Fines and Penalties for W-2 Non-Compliance

As an employer, ensuring timely and accurate filing of W-2 forms is crucial to avoid hefty fines and penalties. The IRS imposes strict deadlines and severe penalties for late or incorrect filings. At Spodek Law Group, we understand the complexities and challenges that businesses face in staying compliant with tax regulations. Here’s a comprehensive guide to understanding the fines and penalties associated with W-2 non-compliance.

Understanding W-2 Filing Requirements

Employers are required to furnish W-2 forms to their employees and the Social Security Administration (SSA) by January 31 each year. These forms report employees' annual wages and the amount of taxes withheld from their paychecks. Failing to meet this deadline or submitting incorrect information can lead to significant penalties.

Penalties for Late or Incorrect W-2 Filings

The penalties for late or incorrect W-2 filings are scaled based on the delay and the size of the business. Here’s a breakdown of the penalties for the 2023 tax year:

Delay	Penalty per W-2	Maximum Penalty for Small Businesses	Maximum Penalty for Large Businesses
30 days late or less	$60	$206,000	$588,500
More than 30 days late but before August 1	$120	$588,500	$1,766,000
On or after August 1	$310	$1,177,500	$3,532,500
Intentional disregard	$630	No Limit	No Limit

Key Points to Note:

30 Days Late or Less: If you file the W-2 forms within 30 days after the deadline, the penalty is $60 per form.
More Than 30 Days Late but Before August 1: Filing after 30 days but before August 1 increases the penalty to $120 per form.
On or After August 1: Filing on or after August 1 results in a $310 penalty per form.
Intentional Disregard: If the IRS determines that the failure to file was intentional, the penalty is $630 per form, with no maximum limit.

Common Reasons for W-2 Penalties

Beyond late filings, several other issues can trigger penalties:

Incorrect Information: Providing incorrect information on the W-2 forms, such as wrong Social Security numbers or incorrect amounts.
Omission of Information: Failing to include all required information on the forms.
Incorrect Filing Method: Using paper forms when electronic filing is required.
Failure to File Readable Forms: Submitting paper forms that cannot be read by machine.

State Penalties for W-2 Non-Compliance

In addition to federal penalties, some states impose their own fines for late or incorrect W-2 filings. For example:

Georgia: Penalties range from $10 to $50 per W-2, depending on how late they are filed.
Illinois: Penalties start at $5 per late W-2, with electronic filing being mandatory.

Avoiding W-2 Penalties

To avoid these penalties, consider the following best practices:

Timely Filing: Ensure that W-2 forms are filed by the January 31 deadline.
Accurate Information: Double-check all information for accuracy before submission.
Use Correct Filing Method: Follow the IRS guidelines for electronic or paper filing as applicable.
Seek Extensions: If you anticipate delays, apply for an extension using Form 8809.

What to Do If You Receive a Penalty Notice

If you receive a penalty notice from the IRS, it’s important to act quickly. Here are steps you can take:

Review the Notice: Carefully review the notice to understand the reason for the penalty.
Correct Errors: If the penalty is due to incorrect information, correct the errors and resubmit the forms.
File an Appeal: If you believe the penalty is unjust, you can file an appeal. Demonstrating reasonable cause for the delay or errors can sometimes result in penalty abatement.

Conclusion

Navigating the complexities of W-2 filing requirements and avoiding penalties can be challenging. At Spodek Law Group, we are here to help. Our experienced attorneys can guide you through the process, ensuring compliance and mitigating risks. If you need assistance or have received a penalty notice, contact us at 212-300-5196. Let us help you protect your business and avoid costly fines.