SOFTWARE SPECIFICATIONS AND EDITS FOR ANNUAL WAGE REPORTING Tax Year 2004 FOR PREPARING PAPER FORMS W-3 AND COPY A OF FORMS W-2 FOR THE SOCIAL SECURITY ADMINISTRATION Social Security Administration Office of Finance, Assessment and Management Office of Financial Policy and Operations SSA Publication No. 31-011 ICN 436680 July 2004 Table of Contents Introduction 1 Chapter 1 - General When May I Use W-2/W-3 Paper Forms? 2 Paper vs. Magnetic Media/Electronic Filing Requirements 2 A Quick Glance at Computerized Filing Options 3 Highlights of Tax Year 2004 Changes 6 Where Can I Get W-2/W-3 Forms? 7 What Time Period is Covered on the W-2 Copy A 8 How Many Parts are There of the Forms W-2 and W-3? 8 When are W-2 Copy A and the W-3 Transmittal Due to SSA? 9 What are the Rules for Entering and/or Typing the Data? 9 How Should I Prepare the Forms for Submission to SSA? 9 How do I Send the Forms if I Need to Send More than One Package? 10 Where Should I Send the Paper Forms? 11 Who Should Sign Form W-3? 11 Can I Get More Time to File? 11 How Can I Correct a W-2 or W-3 Reporting Error? 12 Balancing and Reconciling of Annual Wage Reports 16 Penalties 17 Record Retention 18 How Can I Verify Employee Names and/or Social Security Numbers? 18 How May I Obtain Additional Copies of this Publication? 20 Who Should I Contact if I Have a Question? 20 Comments 20 Chapter 2 - Special Considerations Terminating a Business 21 Kind of Payer 21 Government Employers 22 Common Pay Agent Reporting 23 Third-Party Sick Pay 25 Part I - What Part of Third-Party Sick Pay is Taxable? 26 Part II - Who Pays the Taxes and Who Reports the Information? 27 Reporting Requirements - Liability is Transferred 29 Liability is not Transferred - Third-Party Provider is Responsible 34 Chapter 3 - Standards, Specifications and Edits Introduction 35 Form W-2 36 Form W-3 49 Chapter 4 - Common Errors - Dos and Don’ts Overall 57 Data Entry 57 Boxes that Contain Amounts 58 Employer Identification Number 58 Employee Social Security Number 58 Employee Name 59 Chapter 5 - Reporting Examples for Preparing Paper Forms W-2, W-3, and 941 Introduction 61 Inquiries 61 What is the Social Security and Medicare Tax Amount? 61 Exhibits: Payroll Register Data Tables 62 Part I: Cabot Cove Case Scenario Wage and Tax Deposit Data – Forms W-2, W-3 and 941 Introduction 69 Payroll Register vs. Forms 941 69 Forms 941 vs. Forms W-3 70 Forms W-3 vs. Forms W-2 70 Annual Mock-up Form 941, Quarterly Forms 941 72 Forms W-3 for Forms W-2, Cabot Cove School District 77 Part II: Cabot Cove Case Scenario Employee Wage and Tax Statements - Correct vs. Incorrect Reporting Introduction 79 Form W-2, Wage and Tax Statement: Reporting Employee Names and Social Security Numbers 80 Reporting Social Security/Medicare Wages and Taxes 81 Reporting FICA Exempt Wages and Taxes 84 Reporting Group-Term Life Insurance Over $50,000 85 Reporting Third-Party Sick Pay 87 Reporting Third-Party Sick Pay Recap 89 Reporting Third-Party Sick Pay Liability Not Transferred 90 Nonqualified Deferred Compensation 92 Split Reporting Option 94 Optional Combined Reporting 96 Part III: Wiremasters Company Case Scenario Special Reporting Situations 97 Exhibits: Payroll Register Data Tables 98 Annual Mock-up Form 941, Quarterly Forms 941 102 Form W-3 for Forms W-2, Wiremasters Company 107 Forms W-2 Wage and Tax Statements, Wiremasters Company 108 Appendix A: Employer Checklist 113 Appendix B: SSA’s Regional Employer Service Liaison Officers 117 Appendix C: IRS/SSA Publications 119 Appendix D: Chart to Relate Paper W-2/W-3 Entries to Magnetic Media Reporting and Electronic Filing Data Fields 121 Appendix E: Acronyms 123 Introduction Welcome to the Software Specifications and Edits for Annual Wage Reporting – Tax Year (TY) 2004 booklet. This booklet is intended for Employers, Human Resource/Payroll Departments and Software Developers who use and/or produce paper W-2, Wage and Tax Statements and W-3, Transmittal of Wage and Tax Statements reporting forms. One of the best rewards employers can provide to their employees is the accurate reporting of their earnings to the Social Security Administration (SSA). SSA uses the W-2 Copy A and W-3 to determine eligibility to and amount of benefits employees and their families may receive. These may be benefits they are receiving now or will receive in the future. The initial step to offering our benefits is to determine past and present earnings. We offer a number of benefits. These benefits are: * Retirement Insurance – monthly benefits for retired workers as early as age 62. * Disability Insurance – monthly benefits for people, including children, who have a qualifying disability. * Family Insurance – monthly benefits for spouses and children of retired or disabled workers. * Survivors Insurance – monthly benefits for widows/widowers and children of deceased workers. * Medical Insurance – benefits to help pay for hospital bills and other types of medical services. Our focus is to provide you with the information, tools, formats and other necessary components to correctly report employee wage/earning information on paper forms. Inserting the correct dollar amount in the correct box is just one of the steps toward providing quality information. Legibility, proper use of decimal points, periods, dollar signs, commas and proper sizing of boxed areas are all integral parts of providing readable, optically scannable and acceptable data. Remember that your employees’ benefits could depend on how you report their wage information. We have many resources available to meet your needs for successful completion of paper W-2 and W-3 wage reports. Some are presented here, while other resources are just a telephone call or website away. Examples of Forms W-2 and W-3 and the reconciliation of the forms to the Internal Revenue Service (IRS) reports are given in later chapters along with a section showing common errors. Appendices indicating SSA offices, other related publications and websites are contained in the back of this booklet. Chapter 1: General When May I Use W-2/W-3 Paper Forms? Paper Forms W-2 and W-3 may be filed with SSA in certain circumstances, as detailed in the chart below. IfThenYou have less than 250 employees…YES, paper Forms W-2 and W-3 may be used. (Have you considered electronic or magnetic media filing?)You have 250 or more employees…NO, you must file using magnetic media/electronic filing. You have 250 or more employees and missed or forgot an employee’s record on the magnetic media/electronic file…YES, paper forms may be used for the employee files missed or forgotten, but the number of forms cannot exceed 249. Paper vs. Magnetic Media/Electronic Filing Requirements We offer many computerized methods to file Forms W-2 Copy A and W-3 such us: * Filing electronically - either upload a wage report or use the W-2 Online option. * Using magnetic media - Tape, Cartridge or Diskette. CAUTION: TY 2004 is the last year we will accept tape or cartridge submissions. TY 2005 is the last year we will accept diskette submissions. All magnetic media filers will have to convert to electronic filing. * Transmitting via Electronic Data Transfer (EDT) - Some State and Federal agencies, have the option of transferring data over a dedicated line to electronically exchange pertinent program and benefit information. We encourage you to use an automated method or the Internet to file your wage reports. Using this technology increases the accuracy rate, decreases the processing time and is convenient for most employers, certified public accountants and payroll service providers. Please note that instructions for completing, filing and mailing paper Forms W-2 and W-3 are different from the instructions for completing, filing and sending the magnetic media/electronic filing to SSA. A Quick Glance at Computerized Filing Options Almost every year we are able to offer new and improved ways for you to file your Forms W-2 and W-3 using an Internet method. A brief summary of our computerized filing options is below. If you have questions about any of these methods or desire more information, we provide Internet addresses, telephone listings and publications where you can obtain additional information. You may call the Employer Service Liaison Officer (ESLO) who serves your region for additional assistance (see Appendix B). We periodically schedule training seminars, covering topics on electronic filing. Your ESLO can give you more information on upcoming seminars or you can check the Internet for a listing of seminars near you. The seminars include coverage of Business Services Online (BSO), a suite of Internet services for businesses that exchange information with SSA. For more information on BSO, visit our website at: http://www.socialsecurity.gov/bso/bsowelcome.htm Use BSO to: * Submit an electronic file containing annual wage data; * Create, print, save and submit Forms W-2 online; * View status, notice and error information with your wage-data submissions; * Acknowledge a notice from SSA asking you to resubmit your wage data; * Request a one-time 15 day extension requiring you to resubmit your W-2 data; * Practice on our BSO tutorials which provide an overview on how to use the BSO products; * Submit up to five Forms W-2C online. This new feature for TY 2004 is for users who wish to file online corrections to previously submitted Forms W-2. Did you know that: If you file Forms W-2 Copy A and W-3 with SSA electronically, Then the due date for filing these forms with SSA is extended until March 31, 2005 (versus the paper filing due date of February 28, 2005). We are always looking for new and better ways to receive and process data. The following is a program that we are now piloting with pre-selected organizations: Social Security Number Verification Service (SSNVS) - An online service where you can verify your employee’s name and SSN against SSA’s records. We will verify if the date of birth (DOB), gender, SSN and name of your employee properly match to our records. The results of your request are usually available within 24 hours. If you find a computerized method that suits your filing needs, go ahead and register to use it – in most cases that can be done online as well. Electronic and Magnetic Media Filing Methods Create Forms W-2 Online - This feature is geared to and already favored by many small business filers. You can create, print, view, save and submit up to 20 Forms W-2 online. You can also print out the forms for filing with your employees and State and local governments. Using the W-2 Online software, you can store your unsubmitted Forms W-2 on your computer for up to 90 days. Certain restrictions do apply. We offer this method through our BSO. Upload a Wage File - You can transmit an electronic file containing W-2 data to SSA over the Internet. We even offer AccuWage software that you can download from the Internet to your work station to verify that your file complies with the Magnetic Media Reporting and Electronic Filing for W-2 (MMREF-1) format for the tax year. You may submit a test file to verify transmission capability. We offer this method through our BSO. EDT - This option is only available to Federal and State agencies. The agencies can connect directly to SSA via a dedicated telecommunications line to transmit the filing information. Magnetic Media Filing (Magnetic Tape, Cartridge or Diskette) - You can create a program and file your own wage reports on magnetic media or you may choose to use off-the-shelf software meeting SSA requirements. Visit the SSA Vendor List at http://www.socialsecurity.gov/employer/vendor.htm for a listing of companies that offer wage reporting services and/or products. For TY 2004, SSA accepts the following magnetic media for W-2 reporting: * 3480/3480E cartridges * 3490/3490E cartridges * 3 ½” MSDOS compatible high or double density diskettes * ½ inch magnetic tape Please note: Magnetic Media options will phase-out according to the following schedule: * The last year you may file using cartridges or tapes is for TY 2004. * The last year you may file using diskettes is for TY 2005. * You must use electronic filing to send us your submission beginning with TY 2006. Information on Computerized Filing Methods - To obtain information on any of the above magnetic media or electronic filing methods, you may: * Call 1-800-772-6270 or 1-800-772-1213 Monday through Friday, 7:00 a.m. to 7:00 p.m. Eastern Time. For TDD/TTY call 1-800-325-0778. If you are blind or print impaired, call our Braille Services at 410-965-6414 between 7:00 a.m. to 7:00 p.m. Monday through Friday. * Access the Internet at http://www.socialsecurity.gov/employer and browse through the various sections offered in our Employer Reporting Instructions and Information website. * For specific information go to http://www.socialsecurity.gov/employer, select Forms and Publications and click on the publication of interest to you such as: BSO Handbook, MMREF-1-TY04, and Vendor List for Magnetic Media and Electronic Filing. * For information on training classes, use the same website, http://www.socialsecurity.gov/employer, and select Training Seminars. * Contact your ESLO as listed in Appendix B. CAUTION: If you file paper forms, do not file the same information electronically, or vice versa. Duplication of information causes processing delays, inaccurate employees' SSA earnings records and benefits, tax audits and possible tax liabilities. Highlights of Tax Year 2004 Changes The following changes for TY 2004 impact your reporting of W-2/W-3 annual wage information. * Social Security taxes will be withheld at the rate of 6.2 percent up to $87,900 of employee wages. Medicare taxes continue to be withheld at a rate of 1.45 percent on all wages. The change affects the specifications and edits for Form W-2, boxes 3, 4 and 7. * 2004 Forms W-2 and W-3 have a new size. Now the official and laser printed versions of forms W-2 and W-3 are the same size. This enables programmers to write universal code for use on both types of forms. Make sure your Forms W-2 Copy A and W-3 reflect these changes. * The dollar signs have been removed on 2004 Forms W-2 Copy A and W-3. We did this to allow more space in each of the boxes. * With your employee’s consent, you may be able to furnish W-2 copies B, C and 2 electronically to your employees. See IRS Publication 15-A for more information. * Advanced Earned Income Credit (EIC) - The maximum amount of the advance EIC increased to $1,563. This change affects the specifications and edits for Form W-2 box 9. * Code T – Adoption Expenses - The exclusion amount for “Code T,” Adoption Expenses, has increased to $10,390. The change affects standards, specifications and edits for Form W-2 boxes 12a-12d. * Code W - Health Savings Accounts (HSA) - New code for use in box 12 of Form W-2. Employer contributions to an HSA are designated with a “Code W” and the amount and code placed in box 12. * Section 457(b) Governmental plan distributions made after December 31, 2001 to State and local agencies are generally reported on Form 1099-R. See IRS Notice 2003-20 for more details. * New for Form 8809 – By sending Form 8809 to the IRS, an automatic extension of 30 days is granted for filing Forms W-2 Copy A with SSA. * February 28, 2005 is the due date to SSA of paper Forms W-2 Copy A and W-3. File Copy A of Forms W-2 with the entire first page of Form W-3 with SSA by February 28, 2005. * Privacy Act and Paperwork Reduction Act Notice has been moved. This notice has been moved to the back of Form W-2 Copy D. * W-2C Online application has been added for users who wish to file online corrections to previously submitted Forms W-2. This application will allow up to five Forms W-2c in each report. Where Can I Get W-2/W-3 Forms? You must use standardized forms. You can get the official IRS W-2 and W-3 paper forms from the IRS, by visiting the IRS website at www.irs.gov or by calling 1-800-829-3676 (1-800-TAX-FORM). If calling, please allow at least 10 days for delivery. Local IRS offices stock these forms. The IRS also has current forms, instructions and publications available on a CD-ROM that you may purchase. You may purchase the CD-ROM by calling 1-877-CDFORMS or ordering the CD-ROM online at the www.irs.gov website. Check the forms to make sure that the W-2s and W-3s are for the same tax year and the tax year for which you are filing your employee information. Please note that because we process the paper forms by optical scanners, you cannot file Forms W-2 and W-3 that you print from the IRS Website with SSA. We allow substitute forms which are forms printed by parties other than the IRS. The substitute forms must meet the standards described in IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3. We accept laser printed forms as well as the standard red drop-out ink accepted in prior years. Laser printed forms require initial approval. To receive approval, you may first contact us via email at laser.forms@ssa.gov to obtain a template and further instructions. Or, you may send your initial sample laser-printed substitute forms to: Social Security Administration Wilkes-Barre Data Operations Center ATTN: Laser Forms Approval, Room 359 1150 E. Mountain Drive Wilkes-Barre, PA 18702-7997 Red-ink substitute forms that conform to the specifications in IRS Publication 1141, may be privately printed without prior approval from the IRS or SSA. Go to our website: http://www.socialsecurity.gov/employer/vendor.htm for information on vendor provided products and/or services that may aid you in your annual wage filings of Forms W-2 and W-3. Substitute forms for territories, W-2AS (American Samoa); W-2GU (Guam); W-2CM (Commonwealth of the Northern Mariana Islands); and W-2VI (Virgin Islands) also are to conform to the specifications as outlined in IRS Publication 1141. If you use a software package to prepare your Forms W-2 and W-3, make sure it is compliant with IRS Publication 1141. If you are a software vendor desiring to have your forms approved, follow the instructions in IRS Publication 1141. What Time Period is Covered on the W-2 Copy A? The earnings information reported on Form W-2 Copy A must be for a calendar year basis which covers the period of January 1 through December 31. Please make sure the W-2 forms you are using are for the year of earnings data you are reporting. How Many Parts are There of the Forms W-2 and W-3? The official IRS Form W-2 contains six (6) parts as described below: * Copy A – For SSA; * Copy 1 – State, City or Local Tax Department; * Copy B – To Be Filed With Employee’s Federal Tax Return; * Copy C – For Employee’s Records; * Copy 2 – To Be Filed With Employee’s State, City, or Local Income Tax Return; * Copy D – For Employer. The official IRS Form W-3 is a one part form that requires a signature from an authorized signer. The Form W-3 must accompany any Forms W-2. Remember to make a photocopy of Form W-3 to retain for your records. The employer is responsible for: * Filing the Forms W-2 (Copy A) and Form W-3 with SSA; * Distributing copies to employees (Copy B, Copy C, and Copy 2 of Form W-2); * Filing with the appropriate State, city and local taxing authorities (Copy 1 of Form W-2). Contact your State or locality for specific reporting information and; * Retaining a copy for your records (Copy D of Form W-2). When are W-2 Copy A and the W-3 Transmittal Due to SSA? For TY 2004, file Forms W-2 Copy A and the W-3 with SSA by February 28, 2005. What are the Rules for Entering and/or Typing the Data? Chapter 3 and Chapter 4 provide in-depth detail on the overall requirements to properly complete each box on the Forms W-2 Copy A and W-3, as well as how to avoid common mistakes. For your convenience, some quick tips on proper formatting are offered below. * Entries should be made in black ink and if possible, use 12-point Courier font. * Make all dollar entries without the dollar sign and without the comma but use the decimal point and show the cents portion of money amounts. * Do not erase, whiteout or strike over an entry. * Do not use script, inverted font, italics and/or dual case fonts when entering data on the forms. * Enter in the first half of the Form W-2 box e, the first name and middle initial of your employee. In the second half of box e, enter your employee’s last name. See Chapter 4: Common Errors - Dos and Don’ts. A section is dedicated on how to avoid common errors on the reporting of your employees’ names. How Should I Prepare the Forms for Submission to SSA? Please note the following directions when preparing and assembling your paper Forms W-2 Copy A and W-3 for mailing to SSA. Grouping of Forms Generally, Forms W-2 Copy A are grouped by type of W-2 form and by kind of payer. A separate Form W-3 should accompany each grouping of W-2s. Most companies only issue one type of Form W-2 and have only one kind of payer. See Chapter 2: Special Considerations under “Kind of Payer” for more information. Preparation You may choose one of the two allowable methods to properly organize and prepare your Forms W-2 Copy A. Your Forms W-2 Copy A may be prepared either: * Alphabetically by your employees’ last names; OR * Numerically in order by your employees’ SSNs. Assembling * Do NOT separate the W-2 Copy A forms. The entire sheet should remain intact. Submit the entire W-3 transmittal form, as well. * Do NOT send cash, checks or money orders. * Do NOT staple any of the forms (W-2s or W-3) together. * Do NOT tape any of the forms (W-2s or W-3) together. * Do NOT bend or fold the forms (W-2s or W-3). Send in a flat mailing envelope. These forms are read by optical scanners. Staple holes, folds, tape and/or tears cause the optical scanners to jam. How do I Send the Forms if I Need to Send More than One Package? If you need to send multiple packages due to the large quantity of paper forms you are filing (no more than 249, see page 2 for limitation), please note the following: You may send more than one package but you must: * Indicate the number of packages that you are sending on your completed Form W-3 at the bottom of the form below the title. * Place the completed Form W-3 in the first package. * Number each package in order, i.e. 1 of 3, 2 of 3 and 3 of 3. * Show your name and employer identification number (EIN) on each package. * Send the Forms W-2 Copy A and W-3 to SSA by First-Class Mail. Where Should I Send the Paper Forms? Mail ONLY paper W-2 Copy A and W-3 Transmittal forms to the addresses listed below. Regular Mail Certified Mail Other IRS-Approved Private Delivery Service* Social Security Social Security Social Security Administration Administration Administration Data Operations Center Data Operations Center Data Operations Center Attn: W-2 Process Wilkes-Barre, PA Wilkes-Barre, PA 1150 E. Mountain Drive 18769-0001 18769-0002 Wilkes-Barre, PA 18702-7997 *See IRS Circular E (Publication 15) for listing of approved Private Delivery Service carriers. Please note: Do not use this address to mail magnetic media tapes, cartridges or diskettes. Also, do not send paper correction Forms W-2c and W-3c to the address listed above. Who Should Sign Form W-3? Employers typically sign the Form W-3. Other senders such as a service bureau, paying agent or disbursing agency may sign Form W-3 on your behalf, if the sender: * Is authorized orally, in writing or implied by an agency agreement that is valid under State law AND * Writes “For (name of payer)” next to the signature. Please note: Even if an authorized person signs the Form W-3, the responsibility for accurate and timely filing still rests with the employer. Can I Get More Time to File? Need extra time to file Forms W-2 Copy A with SSA? Fill out IRS Form 8809 - Application for Extension of Time to File Information Returns. By sending Form 8809 to IRS, you will receive one automatic 30 day extension of time to file your Forms W-2 Copy A with SSA. No signature or explanation is required for the first extension request. The automatic extension is 30 days from the original due date of Forms W-2 Copy A. Requests for an additional extension of time are not automatically granted. Before the first extension expires, you may request one additional extension of not more than 30 days by submitting a second Form 8809. This second extension requires IRS written approval. You can get IRS forms by visiting their website at www.irs.gov or calling 1-800-829-3676 (1-800-TAX-FORM). If requesting delivery of forms through the mail, please allow at least 10 days for delivery. IRS Form 8809 must be: * Filed by the due date of the W-2 Copy A. If this request is filed after the due date of the W-2 Copy A, an extension cannot be granted. * Sent to the IRS address indicated on the form. * Completed in the format as specified by the IRS as there are specific rules on paper vs. electronic filing of the extension form. CAUTION: IRS Form 8809 extension for Forms W-2 is ONLY for the Form W-2 Copy A; the copy sent to SSA. The filing extension does NOT apply to W-2s due to your employees or the W-2s you are required to file with your State or local jurisdictions. Please contact the IRS for more information on late filings to employees and contact your applicable State and local authorities for an extension to file their copy of the W-2. How Can I Correct a W-2 or W-3 Reporting Error? This section provides information on using paper Forms W-2c and W-3c. It highlights some of the situations you may encounter if you have to correct W-2s and the W-3 transmittal. These illustrations are not meant to be comprehensive. You will find more information from both SSA and the IRS by: * Requesting SSA Publication No.31-031, Software Specifications and Edits for Correcting Annual Wage Reports by visiting our website at http://www.socialsecurity.gov/employer or calling 1-800-772-6270 or using Appendix B to contact your ESLO. This publication is currently being revised with new regulations and information so keep checking the website for the updated version. * Requesting IRS Instructions for Forms W-2c and W-3c and the official Forms W-2c and W-3c by visiting www.irs.gov or calling 1-800-829-3676 (1-800-TAX-FORM). Note: For W-2c and W-3c Magnetic Media/Electronic Filing information and instructions, you may use the SSA Publication MMREF-2. How Can I Correct the Employee’s Copy of the W-2 Correcting wage data involves understanding the type of error that occurred, the timing of the mistake and using the right forms. If you report an incorrect amount to SSA and the employee, then you must make the correction by filing Forms W-2c and W-3c. However, if you correct the data before you send us the paper forms or if the only incorrect data is an incorrect employee address, then Forms W-2c and W-3c are not required. Voids If you find an error after the W-2 is issued to the employee but before the W-2 Copy A is sent to SSA, check the “Void” box on the top of the original W-2 Copy A. Complete a new Form W-2, mark “Corrected” on copies B, C and 2 and send them to the employee. Send us the new W-2 Copy A along with all the other W-2 Copy A sheets (including any other W-2s Copy A marked “void”). CAUTION: Do NOT include Void W-2s in the total count in box c of the W-3 transmittal. Incorrect Employee Address on W-2 Form If all other information on the W-2 Copy A is correct except the employee’s address, a W-2c should NOT be filed with SSA, but you must correct the employee’s copy of the W-2 by doing one of the following: * Mail or otherwise deliver to the employee, the Form W-2 containing the incorrect address in an envelope labeled with the correct address. OR * Issue a new Form W-2 to the employee with the new address and all other information fully completed on the W-2. The employee’s copies (B, C and 2) must be marked “REISSUED STATEMENT.” CAUTION: Do NOT send the W-2 Copy A with the new address to SSA. OR * Issue a Form W-2c to the employee showing the correct address in box “f”. CAUTION: Do NOT send the W-2c for the employee address correction to SSA. Incorrect Employee Name and/or SSN If the original W-2 Copy A has already been filed with SSA, then a W-2c must be filed with SSA. Fill in only the alpha boxes “a” through “i” where appropriate on the W-2c. The numeric boxes, 1-20, are left blank. You may furnish W-2c copies B, C and 2 to the employee but you must advise your employee to correct the SSN and/or name on his or her copy of the originally issued W-2. File a Form W-3c whenever you file a Form W-2c, even if you are only filing Form W-2c to correct an employee’s name and/or SSN. Incorrect Amounts A W-2c must be completed if amounts are incorrect on the original W-2 Copy A filed with SSA. For boxes 1-20: * If the Previously reported and Corrected information amounts are not being changed for a particular box, leave the boxes blank. Do not make an entry in these boxes on W-2c Copy A unless there is a change. * If any item shows a dollar change and one of the amounts is zero, enter “0”. Do not leave the box blank. * Enter under Previously reported the amount reported on the original Form W-2 Copy A. * Enter under Correct information the correct amount. * Special rules may apply for boxes 3, 5 and 7 if you are a State, local or Federal employee. Please see Software Specifications and Edits for Correcting Annual Wage Reports for more information. * Boxes 15-20 - If you are only correcting information/amounts in boxes 15-20, please do not send the W-2c Copy A to SSA. Please check on the proper method to file correcting data with your State and local tax reporting authorities. * File a Form W-3c whenever you are required to file a Form W-2c Copy A with SSA, even if you are only filing Form W-2c to correct an employee’s name and/or SSN. My Employee Lost the Copies of the W-2 Issued to Him/Her, What do I do? You may furnish your employee with a new copy of his/her W-2. Write “REISSUED STATEMENT” on the new copies furnished to your employee. Do not send Copy A of the reissued Form W-2 to SSA. The Only Error I Have is on the Original Form W-3 Sent to SSA Situations do arise where you only need to file a Form W-3c without any accompanying Forms W-2c Copy A. If the only error you need to correct is an error made on the original Form W-3, Then you only need to file a Form W-3c with SSA if the changes pertain to boxes 1-14. If your correction applies to State and local information in boxes 16-19, please check with the appropriate State/local tax authorities for their requirements. Where do I Send the W-2c or W-3c? Mail paper Forms W-2c and W-3c to the following address. Note that paper Forms W-2c and W-3c are sent to different locations than the original W-2s and W-3. Regular or Certified Mail Other IRS-Approved Private Delivery Service Social Security Administration Social Security Administration Data Operations Center Data Operations Center P.O. Box 3333 Attn: W-2c Process Wilkes-Barre, PA 18767-3333 1150 E. Mountain Drive Wilkes-Barre, PA 18702-7997 New Magnetic Media/Electronic Reporting Requirements for Form W-2c If during a calendar year you are required to file 250 or more Form W-2cs, you must now file these corrections using electronic or magnetic media reporting methods unless the IRS granted you a waiver. This only applies if the corrections on Form W-2c are for the immediate prior tax year. W-2cs for years before 2002 are not counted for purposes of the new threshold. The IRS may grant you a waiver from this requirement. See Form 8508, Request for Waiver From Filing Information Returns Magnetically, for filing information. Submit Form 8508 at least 45 days before you file Forms W-2c. W-2C Online The W-2C Online application is for users who wish to file online corrections to previously submitted Forms W-2. This new feature for TY 2004, will use some of the same functionality currently used in W-2 Online and allows up to five Forms W-2C in each report. Use the Correct Forms W-2c and W-3c The latest revision by the IRS to Forms W-2c and W-3c was December 2002. You must use these revised forms when submitting corrections. Balancing and Reconciling of Annual Wage Reports SSA uses wage information to determine entitlement for and the amount of benefits employees and their families may receive. We want your employees to receive the correct amount of benefits based on their wages, so we need you to accurately report your payroll information. The totals of your original Forms W-2 and any corrections from Forms W-2c should agree to the grand total of your transmittal Form W-3 and any correcting transmittal Forms W-3c filed. The checking and balancing of wage information does NOT end there. IRS, in cooperation and conjunction with SSA, reviews the information reported on the quarterly 941- Employer’s Quarterly Federal Tax Return or Form 943 - Employer's Annual Return for Agricultural Employees and any correcting Forms 941c filed. If any differences are noted between the reports and their totals, either SSA or IRS will contact you. Before submitting reports or after making changes and corrections, remember to follow through to make sure totals on wage reports balance and agree with each other. Situations may arise where valid differences amongst the forms could occur. Document the differences and their reasons. Keep copies of your reconciliation in case of inquiries either by the IRS or SSA. Please remember: * Reconcile the totals of W-2s and W-2cs to the cumulative total of the W-3 and W-3c for the applicable tax year. * Reconcile the totals from IRS Forms 941 or 943 and 941c to the grand totals from above for the same tax year. Caution: Form 941c is not filed on its own. It is filed and attached with a current Form 941. When reconciling, make sure you are agreeing totals for the correct tax year. * Forms 941, 943, and 941c report both the employee and employer’s Social Security and Medicare taxes withheld which is double or twice the amount reported on Forms W-2 and W-3. Forms W-2 and W-3 show just the employees’ Social Security taxes withheld. Please remember to take that into consideration when reconciling the totals. * Reconcile equivalent reports such as Transmitter Report and Summary of Magnetic Media Form 6559 filed with SSA with any correcting Forms W-2c and W-3c and with Forms 941 (943) and 941c filed for the same tax year. Penalties The law requires IRS to consider imposing penalties on nonconforming Forms W-2 based on a multi-tier system. The IRS 2004 Instructions for Forms W-2 and W-3 provide a complete description of the penalty provisions. The penalty amounts are based on when correct information is filed. SSA advises IRS of the dates of receipt of all late-filed reports and the IRS determines if penalties are applicable. Reasons for penalties include but are not limited to: * Failure to file machine-readable paper forms. * Failure to file timely. * Failure to include all information required. * Failure to file correct information. * Failure to file on magnetic media/electronically when required. * Failure to file correction data. Please note: An employer is not relieved of the responsibility to ensure Forms W-2 are filed timely and correctly with SSA and employees just because a reporting agent or third-party payroll service provider is used. Record Retention We may contact you with questions regarding the W-2 and W-3 information you filed. You must maintain your Forms W-2 and W-3 for at least 4 years. Employer copies of W-2 Employer copies of W-3 *Undeliverable original W-2s Employer copies of W-2c & W-3c * Undeliverable employee original W-2s that were returned by the postal service should be maintained and kept by the employer and should NOT be sent to SSA. How Can I Verify Employee Names and/or Social Security Numbers? Employers can verify that the names and SSNs of their employees match to the name and SSN on file at SSA. This free service is offered year round and is called Employee Verification Services (EVS). Using EVS allows you, the employer or third-party submitter, to make sure names and SSNs match prior to filing the Forms W-2 Copy A and W-3. Checking the names and SSNs up front helps you to reduce the number of errors and corrections you may have to make later. This service also aids in making sure the correct information is posted to the correct employees’ Social Security records. The table below briefly summarizes the verification methods available. For additional information, call the Employer Reporting Branch at 1-800-772-6270, visit the SSA Website at http://www.socialsecurity.gov/employer for a copy of the SSA Publication No. 20-004, EVS, Employer and Third-Party Submitter Instructions or call your ESLO as listed in Appendix B. Employee Verification Services If you want to verify For a small group of employees/SSNs (1 to 5 names) Then Verification will be given over the telephone. Call the Employer Reporting Branch at 1-800-772-6270. If you want to verify For a large group of employees/SSNs (up to 50 names)Then Submit your paper lists to your local SSA office. Some offices can accept fax listings. To find an office near you, visit SSA's website at http://www.socialsecurity.gov/employer or see Appendix B. For a larger group of employees/SSNs (greater than 50 names) A simple registration process is required. 1. Complete a registration form and privacy act statement and mail or fax the forms to SSA. 2. We will issue a requester identification code and you will be ready to submit your data file or paper listing. 3. Each submittal by paper should not contain more than 300 names and SSNs for verification at a time. Diskette and/or magnetic tape submissions should not contain more that 25,000 names at a time. Publication No. 20-004, EVS, Employer and Third-Party Submitter Instructions, provides the forms and the additional information you will need to use this process. As noted in Publication No. 20-004: Any information the employer receives from SSA’s records is governed by the Federal Privacy Act, 5 USC 552a(1). Under the Act, anyone who obtains this information under false pretenses or uses it for purposes other than that for which it was requested, may be punished by a fine or imprisonment or both. How May I Obtain Additional Copies of this Publication? You may obtain additional copies of this SSA publication by: * Using the Internet to read and print this publication directly from the employer website :http://www.socialsecurity.gov/employer/pub.htm. * Contacting your local ESLO (Appendix B). Who Should I Contact if I Have a Question? Operational or technical questions should be directed to your respective ESLO listed in Appendix B. Tax questions or questions on tax law and regulations may be addressed to the IRS Information Reporting Customer Service Site at telephone number 866-455-7438. Employers with questions concerning the SSA and IRS reconciliation of W-2 data, Medicare reporting error notices and/or questions concerning magnetic media and electronic filing may contact SSA at 1-800-772-6270 on Monday through Friday from 7 a.m. to 7 p.m. (Eastern time). Comments Comments or suggestions regarding this document should be forwarded to the: Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 Chapter 2: Special Considerations Terminating a Business If your company is going out of business or terminating operations, special rules apply for completing the paper Forms W-2 and W-3. The due date for the Forms W-2 Copy A and W-3 to SSA for companies terminating are different than the dates for a business continuing operations as a successor employer. Contact your ESLO (see Appendix B) for an explanation. Forms W-2 Copy A and W-3 to SSA - Are due the last day of the month that follows your final Form 941 return due date to IRS (i.e., 2 months after the close of a quarter). W-2s to employees - Issue to employees by the due date of the final Form 941. Kind of Payer Most companies only have one “kind of payer.” If you have more than one kind of payer, you must group the W-2s Copy A by each kind of payer and send with a separate Form W-3 to SSA. See third-party sick pay below for the exception to that rule. The W-3 transmittal box b is where the kind of payer is found. If you File Form 941 - Employer’s Quarterly Federal Tax Return Then your “kind of payer” is: …941 If you Are a U.S. State or local agency filing forms for employees subject only to the 1.45 percent Medicare tax (MQGE)… Then your “kind of payer” is: Medicare govt. emp. If you Are a military employer sending Forms W-2 for members of the uniformed services… Then your “kind of payer” is: Military If you File Form 943 - Employer’s Annual Tax Return for Agricultural employees and are sending Forms W-2 for Agricultural employees… Then your “kind of payer” is:943 If you Are a railroad employer - employees are covered under Railroad Retirement Tax Act (RRTA)… Then your “kind of payer” is:CT-1 If you Have household employees and did not include their taxes on Form 941 or Form 943… Then your “kind of payer” is: Hshld. emp. If you Are a third-party sick pay payer (or are reporting sick pay payments made by a third-party) filing Forms W-2 copy A with box 13 “Third-party sick pay” marked on the W-2… Then your “kind of payer” is: Third-party sick pay. This is the only “kind of payer” where you can have two boxes marked – i.e., 941 and Third-party sick pay - on the same W-3. Note: You may only check one “kind of payer” box on the W-3 transmittal (except for third-party sick pay). You must group your W-2s Copy A by kind of payer. A separate W-3 is required for each group of W-2s Copy A. Government Employers Some Federal, State and local government agencies have situations where, within the same year, the employee wages are subject only to Medicare tax AND the employee wages are subject to both Social Security and Medicare taxes. Two methods are available for reporting this information on the W-2 Copy A. Option 1 Combined reporting method - File a single W-2 that reports the Medicare only wages and the Social Security and Medicare wages combined. The Form W-3 box b has the “941” kind of payer checked. OR Option 2 Split reporting method - File two separate W-2s and two W-3s. One W-3 and W-2 would indicate the Medicare only wages for the employee. The Form W-3 box b should have “Medicare govt. emp.” kind of payer checked. AND The second W-3 and W-2 would be for the same employee but would report the wages where both Social Security and Medicare were withheld. The Form W-3 box b should have “941” kind of payer checked. Please Note - SSA prefers Option 1. It condenses the paperwork requirements and decreases the chances of reporting errors. Common Pay Agent Reporting Some employers have an IRS-approved agent file payroll reports (W-2/W-3) with SSA and Forms 941 to the IRS on their company's behalf. An employer that wants to use an agent prepares IRS Form 2678, Employer Appointment of Agent, and submits the form to the agent. The agent must submit the Form(s) 2678 to IRS along with a letter requesting agency status. To be recognized as an agent, you must have written approval from the IRS. Approved agents may file payroll and tax liability reports on behalf of one or more companies. Generally, an agent that has an approved Form 2678 must enter his or her name as the employer in box c of Form W-2 and each Form W-2 should reflect the EIN of the agent in box b. In addition, the employer’s EIN must be shown in box h of Form W-3. If you are an agent, special reporting situations can occur when completing the Forms W-2 Copy A and the W-3 transmittal to SSA. If you, the agent, file Forms W-2 on behalf of other employers in an agent capacity, please remember: On Form 941 Use Your EIN and your name and address on the form. You are to: Report all wage, tax, and other information requested on the Form 941 on a consolidated basis for: 1. Your employees, AND 2. The employees of the employers you represent as an agent. On Form W-2Use Your: 1. EIN in box b of the W-2 AND 2. Name and address in box c of the W-2. *see W-2 exception You are to: File one consolidated W-2 for each employee. Even if an employee works for you and for one or more of the employers you represent as an agent, only one consolidated W-2 is filed for that employee. *see W-2 exception BUT, if the consolidated Social Security wages of that employee exceed the Social Security wage limit for that tax year, then more than one W-2 must be filed for that employee. See the next page for more details. *see W-2 exception Form W-2 ExceptionIf you, the agent, have an employee that works for more than one of the employers you represent including yourself, special reporting issues may occur. AND If that employee's consolidated Social Security wages exceed the limit for that tax year, then you MUST file separate Forms W-2 showing the wages paid by each employer to that employee. In the above case, the employee must receive two or more W-2s. The W-2 box b would still be in the agent's employer tax identification number but box c of the W-2 would show: * The agent's name * "Agent for" (name of the employee's employer) * Agent’s address Then 1. In the W-2 box b area - Use your agent's EIN. 2. In W-2 box c employer’s name and address area, please note the following: a. First line – enter your name b. Second line – enter, “Agent for”(name of Employer) c. Third line and thereafter – enter your (the agent’s) full address. Note: If an employee worked for more than one employer during the year and had excess Social Security tax withheld, the employee should claim the excess withheld on the appropriate line of Form 1040 or Form 1040A. It is not the agent’s responsibility to refund excess Social Security tax. W-3The agent should submit all employer Forms W-2 Copy A under one W-3 transmittal. The one W-3 transmittal would include the summary W-2 Copy A information of: * Your employees AND * The employees of the employers you represent as an agent AND * Any W-2s Copy A issued as “Agent for” (name of employer).Enter your agent: Then Enter your agent: 1. EIN in box e of the W-3 2. Name in box f of the W-3 3. Address in box g of the W-3 In box h of the W-3, enter the EIN of the employer you/your client are representing. If you are representing more than one employer, leave box h blank. Note: Please refer to IRS Revenue Procedure 70-6, 1970-1 C.B. 420, for complete filing instructions for “agents.” Also refer to IRS Publication 15-A, Employer's Supplemental Tax Guide. Third-Party Sick Pay The correct reporting of third-party sick pay is as important to your employees as it is to us. The pay timing, nature and amount of those sick payments determines what portion of these payments are included in both Social Security wages and Medicare wages on the W-2. You or your third-party sick pay provider will need to determine who reports the information to SSA. The type of business relationship you have contracted with the third-party sick pay payer will determine how you report information on the employee’s W-2s Copy A, the W-3 transmittal and how you complete and reconcile the quarterly 941s with the W-2s Copy A and W-3. This relationship will also determine who remits taxes withheld from the employee’s pay and who pays the matching employer Federal Insurance Contributions Act (FICA) taxes. What is Third-Party Sick Pay? Third-party sick pay is an amount paid under a plan to your employees who are temporarily absent from work due to sickness, illness, injury or disability. It is usually paid by a third-party such as an insurance company. The sick pay discussed here is NOT the normal sick pay you pay your employees out of the payroll account for a missed day of work due to sickness. Third-party sick pay does NOT include: * Disability retirement; * Workers' compensation; * Medical expense payments; or * Payments unrelated to absence from work. What is Taxable to Social Security Wages and Medicare Wages for Third-Party Sick Pay, Who Reports it and Where is it Reported? Determining what portion of the sick pay is taxable and who reports the wages and taxes depends on a number of factors. The following pages show the different parts (or steps) to help you determine your responsibility and the responsibility of your third-party sick pay payer. Part I – What Part Of Third-Party Sick Pay Is Taxable? A. TIMING - What is the last day your employee worked before becoming entitled to sick pay? The timing of when your employee stopped working is important in determining the taxable base. ** Depending on when your employee received third-party sick pay, it could be taxable.** The basic rule is that Social Security, Medicare taxes and Federal Unemployment Tax Act (FUTA) taxes do not apply to sick pay paid more than 6 calendar months after the last calendar month in which the employee worked. (Note: The 6-month rule does not apply to box 1, Wages, Tips, other compensation wages or box 2, Federal income tax withheld.) TIMING CALCULATION Step 1 What is the last day your employee worked before going out on sick leave? Step 2 Round that date to the end of the month. Step 3 Add 6 months to that date. Step 4 (a)Amounts received by your employee on or before the date calculated in Step 3 are subject to Social Security and Medicare wage inclusion and are subject to those taxes (and FUTA wages and taxes). These amounts are included in box 1, Wages, Tips, other compensation and are subject to box 2, Federal income tax withholding. Step 4 (b) Amounts received after the date calculated in Step 3 are NOT subject to Social Security and Medicare taxes (nor FUTA) but are wages included in box 1, Wages, Tips, other compensation and are subject to box 2, Federal income tax withholding. B. PERCENTAGES - Who paid the premiums for the third-party sick pay - employee, employer or combination? Determining the percentage of the premium paid by you, the employer, and/or the amount contributed by your employee determines the percentage to apply to the amount of sick pay. ** The employer's percentage of the premium paid on the third-party sick pay plan is multiplied by the amount of sick pay to determine the taxable amount.** Overall, the general rule is that if an employee pays for the sick pay plan, then the sick pay received in the time period noted in Step 4 (a) above is NOT Social Security and Medicare taxable nor included in the employee’s Social Security and Medicare wages. The taxable portion of the third-party sick pay for Social Security and Medicare wages and tax calculation would be the amount determined in step 4(a) of the Timing Calculation on the preceding page - multiplied by the employer’s percentage rate as determined in the table below. If The employee pays for all of the sick pay plan in after tax dollars (i.e., contributes to the plan, has money withheld from pay for the sick pay plan). Then None of the third-party sick pay is included in Social Security and Medicare wages; nor is it taxable for Social Security, Medicare or FUTA. The employer did not contribute to the sick pay received and none of the third-party sick pay is taxable. If The employee pays for any part of the sick pay plan in before tax dollars (pretax basis) (i.e., contributes to the plan, has money withheld from pay for the sick pay plan). Then This is considered 100 percent employer paid. All of the sick pay received within the timing limitation as shown in “Part I, A. Timing” IS included as Social Security and Medicare wages and is Social Security, Medicare and FUTA taxable. If Both the employer and employee (employee in after tax dollars) contribute to the sick pay plan. Then Obtain the percentage of the policy cost that you contributed for each of the 3 years before the calendar year in which the sick payments were made. Use that percentage. If the policy is not in effect for 3 years,use your percentage of the cost of the premiums for the years the policy has been in effect. If the policy is not in effect for a full year, use a reasonable estimate of the percentage of your cost for the first policy year. Part II – Who Pays The Taxes And Who Reports The Information? After understanding what makes up the taxable portion of third-party sick pay, questions then arise about who withholds and deposits the taxes and who reports the third-party sick pay information. The answer depends on your contract and terms of agreement with the third-party sick pay provider. TRANSFER OF LIABILITY - SPLIT RESPONSIBILITY Sometimes, the agreements with your third-party sick pay provider will determine who is responsible for withholding, depositing and reporting employee and employer Social Security and Medicare taxes. If the third-party sick pay provider “transfers the liability,” then the responsibility for withholding, depositing and reporting Social Security and Medicare wage and tax data is split between your third-party sick pay provider and you, the employer. If Your third-party sick pay provider: makes the sick payments to your employees, AND withholds the employee portion of Social Security and Medicare taxes, AND deposits ONLY the employee portion of Social Security and Medicare taxes AND informs you timely of when the employee deposits were made so that you can pay the employer matching portion of employer Social Security taxes and Medicare taxes timely and without penalty. Then The third-party sick pay provider has: “Transferred its liability” to the employer. This means that responsibilities are split between you and the third-party sick pay provider. The third-party sick pay provider must withhold, deposit and report the EMPLOYEES Social Security and Medicare taxes (third-party sick pay provider may withhold incomes taxes if requested by employee), AND You must deposit and report your matching Social Security and Medicare taxes AND You must issue the W-2 to the individual employees for third-party sick pay. REPORTING REQUIREMENTS - LIABILITY IS TRANSFERRED THIRD-PARTY SICK PAY PROVIDER RESPONSIBILITIES Liability IS transferred W-2 Third-party sick pay provider prepares a Third-Party Sick Pay Recap Form W-2. This is one W-2 that summarizes all the amounts paid to the employees of all clients as third-party sick pay. Individual W-2s are NOT issued by the third-party sick pay provider if “liability was transferred.” On the one Third-Party Sick Pay Recap Form W-2: box b Employer Identification Number - use the third-party sick pay provider’s EIN. box c Employer’s name, address and zip code - use the third-party sick pay provider’s name and address. box d Employee’s SSN- leave blank. box e Employee’s name - enter “Third-Party Sick Pay Recap”. box 1 Wages, tips, other compensation - enter the total of the sick pay paid to clients’ employees. box 2 Federal income tax withheld - enter any Federal income tax withheld from third-party sick pay by the third-party sick pay provider. box 3 Social Security wages - enter the sick pay subject to employee Social Security tax. box 4 Social Security tax withheld - enter the Social Security tax withheld from employees’ third-party sick pay by the third-party sick pay provider. box 5 Medicare Wages and tips - enter the sick pay subject to employee Medicare tax. box 6 Medicare tax withheld - enter the Medicare tax withheld from employees’ third-party sick pay by the third-party sick pay provider. The Third-Party Sick Pay Recap Form W-2 is used by IRS and SSA to reconcile wages from the 941 or 943 to annual wage reporting on the W-2s and W-3. As part of the W-2 process when the third-party has “transferred its liability,” the third-party sick pay provider MUST provide the employer a Sick Pay Statement. This Sick Pay Statement must: 1. Be issued to the employer by the third-party sick pay provider by January 15 for sick pay paid in the calendar year just ended. 2. Include the following: a. employee's name; b. employee's SSN if Social Security, Medicare and/or income taxes were withheld; c. amount of sick pay paid to the employee; d. amount of income taxes withheld; e. amount of Social Security tax withheld; and f. amount of Medicare tax withheld. The employer's responsibilities Liability IS transferred As the employer, you are responsible for issuing the W-2 to the individual employees for third-party sick pay. You have the option of preparing one or two W-2s for the individuals that have sick pay. If issuing two W-2s: one is for regular wages and one W-2 is for sick pay. If issuing one W-2, combine the totals of the regular wages and sick pay and summarize onto one W-2. A Form W-2 must be prepared even if all the third-party sick pay is non-taxable. box b Employer Identification Number - use your EIN. box c Employer’s name, address and zip code - use your name and address. box d Employee’s SSN - enter the employee’s SSN. box e Employee’s name - enter the employee’s name. box f Employee’s address - enter the employee’s address. box 1 Wages, tips, other compensation - enter any regular wages and the TAXABLE portion of any third-party sick pay payments as calculated in “Part I, Timing and Percentage.” box 2 Federal income tax withheld - enter any Federal income tax withheld. box 3 Social Security wages - enter Social Security wages from regular pay and the TAXABLE amount of the third-party sick pay as calculated in “Part I, What Part of Third-Party Sick Pay is Taxable?” box 4 Social Security tax withheld - enter the Social Security tax withheld from the employee’s regular pay and the Social Security withheld from the employee’s sick pay by the third-party sick pay provider. box 5 Medicare Wages and tips - enter the employee’s regular Medicare wages from regularay and the TAXABLE amount of the third-party sick pay as calculated in “Part I, What Part of Third-Party Sick Pay is Taxable?” box 6 Medicare tax withheld - enter the Medicare tax withheld from the employee’s regular pay and the Medicare tax withheld from the employee’s sick pay by the third-party sick pay provider. box 12 Codes - if applicable, use code J nontaxable sick pay. Show any sick pay not includable in income (and not shown in boxes 1, 3 and 5) because the employee contributed to the sick pay plan. Note: The amount in box 12 and the amount of third-party sick pay included in box 1 when combined should agree to the total third-party sick pay (taxable and nontaxable) your employee received. This reporting is required even if the entire amount of sick pay is nontaxable. box 13 Checkboxes - check the “Third-party sick” pay box only if the amounts were paid by a third party. box 14 Other - you may use this box for any other information that you wish to provide your employees. For instance, with third-party sick pay information, you could type in the third-party provider’s name. W-3 The third-party sick pay provider attaches the Third-Party Sick Pay Recap Form W-2 to a separate Third-Party Sick Pay Recap Form W-3. Prepare the separate Third-Party Sick Pay Recap Form W-3 as indicated below. Complete only boxes b, c, e, f, g, 1, 2, 3, 4, 5, 6 and 13 of the W-3 form. box b Kind of payer - check both the "Third-party sick pay" box and the "941" (or other applicable) box. box c Total number of Forms W-2 - only one W-2 should be attached, which is the Third-Party Sick Pay Recap Form W-2. box 13 For third-party sick pay use only – enter “Third-Party Sick Pay Recap” in this box. box 14 Income tax withheld by payer of third-party sick pay - Do NOT complete this box. The employer completes this box on his W-3. You complete the W-3 summarizing the W-2 Copy A information. box b Kind of payer - check both the Third-party sick pay" box and the "941" (or other applicable) box. box 13 For third-party sick pay use only - Do NOT complete this box. box 14 Income tax withheld by payer of third–party sick pay - you complete this box on the W-3 only if you have employees who had income tax withheld on third-party payments of sick pay. Show the total income tax withheld by third-party payers on payments to all your employees. While this tax is already included in box 2, it must also be reported in box 14. FORM941 Must file Form 941 because of the split reporting responsibilities, line 9 must contain a special adjusting entry for Social Security and Medicare taxes. Third-party sick pay provider’s responsibilities are to include the employee part of Social Security and Medicare taxes (and income tax if any withheld). Line 2 Wages- does NOT include any sick pay paid as third-party sick pay provider. Line 3 Income tax withheld - report the amount of income tax if any was withheld in the capacity of third-party sick pay provider. Line 6a Taxable Social Security wages - third-party sick pay provider enters amount subject to Social Security taxes which includes both: 1. wages paid to its own employees, and 2. amounts paid as third-party sick pay. Line 7a Taxable Medicare wages and tips - third-party sick pay provider enters amount subject to Social Security taxes which includes both: 1. wages paid to its own employees, and 2. amounts paid as third-party sick pay. Line 8 Total Social Security and Medicare taxes - add together amounts from lines 6b, 6d and 7b as stated in the 941 instructions. Line 9 Adjustment of Social Security and Medicare taxes SICK Pay box - third-party sick pay provider subtracts out the employer’s share of Social Security and Medicare taxes. Must file Form 941 because of the split reporting responsibilities, line 9 must contain a special adjusting entry for Social Security and Medicare taxes. Line 2 Wages - include wages of third-party sick pay. (See IRS Publication 15-A, Employer's Supplemental Tax Guide, Chapter 6, Sick Pay Reporting for what is included in Federal wages.) Lines 3, 4 and 5 Income tax withheld and adjustments - employer does NOT complete these lines for third-party sick pay. Line 6a Taxable Social Security wages - include wages of third-party sick pay. Line 7a Taxable Medicare wages and tips - include wages of third-party sick pay. Line 8 Total Social Security and Medicare taxes - add together amounts from lines 6b, 6d and 7b as instructed. Line 9 Adjustment of Social Security and Medicare taxes SICK Pay box - SUBTRACT the employee Social Security and Medicare taxes withheld and deposited by the third-party provider. **Remember, you are responsible for the “employer’s” share of matching Social Security and Medicare taxes.** FORM 940 If liability is transferred to the employer, then third-party sick pay provider has no responsibilities for third-party sick pay on Form 940.The employer prepares Form 940 for sick pay. Transfer of Liability – Optional Rule for Form W-2 If transfer of liability has occurred, you and the third-party sick pay provider may choose, through a legally binding contract, to agree to the third-party sick pay provider becoming your agent for purposes of preparing W-2s reporting sick pay. * If this is agreed upon in writing, the third-party prepares the actual Forms W-2 for each employee and does not need to provide the sick pay statement to you AND * You (the employer) would prepare the Third-Party Sick Pay Recap forms for the W-2 and the W-3. Please see the 2004 Instructions for Forms W-2 and W-3 as well as IRS Publication 15-A, Employer's Supplemental Tax Guide, Chapter 6, Sick Pay Reporting, for specific reporting instructions. LIABILITY IS NOT TRANSFERRED - THIRD-PARTY PROVIDER IS RESPONSIBLE If the third-party sick pay provider does NOT “transfer the liability”, the withholding, depositing and reporting of Social Security and Medicare wage and tax data on the sick pay (both the employee withholding and your matching portion) are the responsibility of the third-party. If Your third-party sick pay provider: Does not meet the requirements for “transferring liability” as explained earlier Then The third-party sick pay provider has: the responsibility of withholding and depositing Social Security taxes, Medicare taxes and Federal income taxes on the third-party sick pay of your employees; AND the responsibility of depositing your matching Social Security taxes, Medicare taxes and your FUTA tax based on the third-party sick pay of your employees; AND the responsibility of completing the W-2s for each of your employees for the third-party sick pay amounts using his third-party sick pay payer name, address and EIN. NOTE: When the third-party sick pay provider does NOT “transfer liability”: * on the W-2, the third-party provider would check box 13, “Third-party sick pay.” * on the W-3, the third-party provider would check in box b the “Third-party sick pay” box. If more than one checkbox applies (i.e., this and the 941 checkbox) file a single FormW-3 that contains the summarized W-2 information from both the regular and “Third-party sick pay” W-2s. AND the responsibility for reporting the sick pay on its own Form 941 and annual Form 940. Please see the 2004 Instructions for Forms W-2 and W-3 as well as IRS Publication 15-A, Employer's Supplemental Tax Guide, Chapter 6, Sick Pay Reporting, for specific reporting instructions. Chapter 3: Standards, Specifications and Edits Introduction This Chapter provides standards, specifications and edits for preparing paper Forms W-3 and W-2 (Copy A) for SSA. These criteria are intended for two audiences - (1) employer human resource/payroll departments and (2) payroll tax software developers. The guidelines include what data to compile, describe what these data should represent and specify certain characteristics that may identify suspect or incorrect data. Also included are which data to print in each Form W-2/W-3 box, data entry content requirements, data entry formats and edits that may identify suspect or incorrect entries. The standards, specifications and edits that follow indicate that a box is either required or optional. If the data elements are required to be submitted to SSA for either (1) use by SSA for programmatic purposes and/or (2) accumulation and transmission to IRS for tax processing and enforcement purposes, the box on Forms W-3 and Copy A of Forms W-2 is identified as required. If the data elements are not required to be submitted to SSA, the box is identified as optional. However, these data elements may still be required on copies of Forms W-2 submitted to employees or State and local entities. Form W-2 Copy A Purpose Form W-2 Copy A, tells SSA that an individual associated with the given SSN had earnings and may be eligible for future benefits and payments. SSA posts the earnings information to retirement accounts of the workers. The entries on Form W-2 are based on earnings for the calendar year from January 1 to December 31. ***We are unable to provide the examples for this chapter in this file format. If you would like to access this chapter, it is available on the internet at www.ssa.gov or a hard copy is available on request. Write to; Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 *** General Instructions on W-2 Preparation 1. Use either IRS official Forms W-2 or privately-printed substitute Forms W-2. If you file a paper Form W-2 Copy A with SSA, then a Form W-3 must also be completed and accompany the Forms W-2 Copy A filed with SSA. 2. Only originals of Form W-2 Copy A may be filed with SSA. Carbon copies and photocopies are not accepted by SSA. 3. SSA accepts only Forms W-2 printed on 8 ½ inch by 11 inch paper (exclusive of any snap stubs.) 4. All privately-printed substitute Forms W-2 must adhere to the specifications contained in IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3. Substitute territorial Forms W-2 (W-2GU, W-2VI, W-2AS, & W-2CM) must also adhere to the specifications included in IRS Publication 1141. 5. Forms may be laser printed in black and white and both the data and forms must be printed in nonreflective black ink only. These forms must comply with IRS Publication 1141. They require approval from SSA as detailed in Publication 1141. The forms must not: * contain corner register marks and * contain shaded areas including boxes that are entirely shaded on the Red-ink forms. 6. All printing of substitute Forms W-2 Copy A, other than laser, must be in Flint J-6983 red Optical Character Recognition (OCR) dropout ink or an exact match, except for the following areas, which are to be printed in nonreflective black ink: * the form identifying numbers “22222” at the top, * tax year at the bottom of the form using 24 point OCR-A font and * the four corner register marks. 7. Prior approval from SSA or IRS is not required on privately printed red-ink substitute forms. Again, these forms must conform exactly to the requirements as stated in Publication 1141. 8. If you are uncertain about any of the specifications or criteria for the physical Forms W-2 and W-3, please send your questions to: SSA for Black and White Laser printed Forms IRS for Red-ink Forms W-2 Copy A and W-3 W-2 Copy A and W-3 Social Security Administration Internal Revenue Service Data Operations Center Attn: Substitute Forms Coordinator Attn: Laser Forms Approval, Room 359 W:CAR:MP:T:T:SP, Room 6411 1150 E. Mountain Drive 1111 Constitution Ave, N.W. Wilkes-Barre, PA 18702-7997 Washington, DC 20224 9. Paper for privately-printed red-ink substitute forms (cut sheets and continuous pin feed forms) that are to be filed with SSA must be white 100 percent bleached chemical wood, 18-20 pound paper only, OCR bond with specific weight requirements. Pinfed strips must be removed when Forms W-2 Copy A are filed with SSA. See IRS Publication 1141. 10. Software used to produce the Forms W-2 should automatically enter required information, such as employer and employee names, addresses, SSNs or EINs, etc. 11. Only alphabetic or numeric information should be entered. Invalid SSNs or EINs should be screened out. 12. Employee tax withholding amounts should be consistent with the taxable wages and rates for Social Security and Medicare. 13. Do not print, write or enter any data in the margins of the form(s). 14. The font used to print data on Forms W-2 should be 12-point courier, using black ink. 15. Do not use script, inverted fonts, italics and/or dual case fonts when entering data on the forms. 16. Do not use inks that contain red pigment on forms that contain employer provided information. 17. Do not erase, whiteout or strike over an entry. 18. Data entries on the Forms W-2 should be machine printed, whenever possible. 19. The data entered must be presented in clear, dark images to guarantee optically scannable forms and all copies must be legible. 20. Insert data within the box. Do not go outside of boxed area when entering data. 21. Make all dollar entries without the dollar sign and without the comma but use the decimal point and show the cents portion of money amounts. 22. If a box does not apply, leave it blank. 23. The back of substitute Forms W-2 (Copy A) must be blank and free of all printing. ***We are unable to provide the examples for this chapter in this file format. If you would like to access this chapter, it is available on the internet at www.ssa.gov or a hard copy is available on request. Write to; Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 *** Form W-3 Purpose Form W-3 is filed ONLY if paper W-2s are filed. Form W-3 has two purposes: 1. It is a summary sheet and contains the summarized totals of all the W-2 Copy A information. 2. It serves as a transmittal sheet in sending the W-2 Copy A information to SSA. General Instructions on W-3 Preparation 1. Generally, the same instructions for preparation of Form W-2 also apply to the preparation of Form W-3. 2. Form W-3 is a single sheet including essential filing information. Be sure to make a copy of your completed Form W-3 for your records prior to mailing. 3. Use either the IRS official Form W-3 or a privately-printed substitute Form W-3. 4. SSA accepts only Forms W-3 printed on 8 ½ inch by 11 inch paper (exclusive of any snap stubs). 5. Software must not permit generating W-3 entries before all corresponding W-2 entries are prepared. 6. The W-3 report which corresponds to Forms W-2 Copy A must reflect the aggregate W-2 money amounts, excluding information from any W-2 Copy A marked “Void”. 7. Make sure the same tax year is shown on both Forms W-3 and W-2 Copy A. 8. Use W-3 control totals to match and reconcile the annual sum of quarterly line item amounts reported on IRS Form 941 or 943. The data on Form W-3 should balance with Forms W-2 and the total of the quarterly 941s. 9. Ensure that a Form W-3 accompanies each “Kind of Payer” group of W-2s submitted. 10. All privately-printed substitute Forms W-3 must adhere to the specifications contained in IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3. 11. Forms may be laser printed in black and white and both the data and forms must be printed in nonreflective black ink only. These forms must comply with IRS Publication 1141. They require approval from SSA as detailed in Publication 1141. The forms must not: * contain corner register marks and * contain shaded areas including boxes that are entirely shaded on the red-ink forms. 12. All printing of substitute Forms W-3, other than laser, must be in Flint J-6983 red OCR dropout ink or an exact match, except for the following areas, which are to be printed in nonreflective black ink: * the form identifying the numbers “33333” at the top; * the tax year at the bottom of the form using 24 point OCR-A font; * the four corner register marks; * the jurat and “Signature, Title, Date” line at the bottom; * The form identification “W-3” at the bottom; and * All the instructions below Form W-3. 13. Prior approval from SSA or IRS is not required on privately printed Red-ink substitute forms. Again, these forms must conform exactly to the requirements as stated in Publication 1141. 14. If you are uncertain about any of the specifications or criteria for the physical Forms W-2 and W-3, please send your questions to: SSA for Black and White Laser printed Forms IRS for Red-ink Forms W-2 copy A and W-3 W-2 Copy A and W-3 Social Security Administration Internal Revenue Service Data Operations Center Attn: Substitute Forms Coordinator Attn: Laser Forms Approval, Room 359 W:CAR:MP:T:T:SP, Room 6411 1150 E. Mountain Drive 1111 Constitution Ave, N.W. Wilkes-Barre, PA 18702-7997 Washington, DC 20224 15. Do not print, write or enter any data in the margins of Form W-3. These areas are used for control information during SSA’s processing. 16. The font used to print data on Forms W-3 should be 12 point courier, using black ink. 17. Do not use script, inverted font, italics and/or dual case fonts when entering data on the forms. 18. Do not use inks that contain red pigment on forms that contain employer provided information. 19. Do not erase, whiteout, or strike over an entry. 20. Paper for privately-printed substitute forms (cut sheets and continuous pin feed forms) that are to be filed with SSA must be white 100 percent bleached chemical wood, 18-20 pound paper only, OCR bond with specific weight requirements. See IRS Publication 1141. 21. Data entries on the Forms W-3 should be machine printed whenever possible. 22. The data entered must be presented in clear, dark images to guarantee optically scannable forms and all copies must be legible. 23. Insert data within the box. Do not go outside of boxed area when entering data. 24. Make all dollar entries without the dollar sign and without the comma, but use the decimal point and show the cents portion of money amounts. 25. If a box does not apply, leave it blank. 26. The back of substitute Form W-3 must be free of all printing and left blank. Chapter 4: Common Errors - Dos and Don’ts Section Overall Common errors made: * Omitting an SSN or using an invalid SSN. * Omitting an EIN or using an invalid EIN. * Omitting an employee's name or using an employee's name that does not agree with the name on the employee’s Social Security card. * Not formatting the employee’s name correctly in box e of the Form W-2. (Enter the employee’s first name and middle initial in the first box and his or her last name in the second box.) * Not submitting wage reports to SSA when terminating a business. * Treating employees as independent contractors and not filing the correct form (W-2) to report their earnings to SSA. * Not filing a W-2 on wages for household workers. * Not issuing Forms W-2 for wages under $600. * Filing a Form W-2 when you should have filed a Form W-2c to correct previously reported wage information. * Submitting Forms W-2 without the transmittal W-3 form. * Submitting Forms W-2 and/or W-3 with incorrect tax year. * Using Forms W-2 or W-3 that are not standard and not in compliance with prevailing rules and regulations. * Preparing Forms W-2 and/or W-3 that are not machine readable/scannable by our imaging equipment. * Mailing the Forms W-2 Copy A and W-3 to the incorrect Government agency (W-2 copy A and W-3 are remitted to SSA). * Creating out-of-balance conditions between the Form W-2 amounts and either the W-3 summary totals or the sum of the four quarterly Form 941 reports or Annual Form 943. * Inappropriately marking the "Retirement plan" checkbox in box 13. Section Data Entry Common Errors made: * Using ink that is too light for data entries (must use very dark nonreflective black ink). Do not use inks that contain red pigment on forms that contain employer provided information. * Not using the correct size of print (font used to print data on the forms should be 12-point courier). * Using script, inverted font, italics and/or dual case fonts when preparing the forms. Data Entry (cont.) Common errors made: * Letting entries cross one or more of the vertical or horizontal lines that separate the boxes. * Striking over an entry, erasing entries, using whiteout. Section Boxes that Contain Amounts Common Errors made: * Using dollar signs or commas in amount boxes (no “$” or “,” are to be used in amount fields). * Not using decimal points (decimal point must be shown even when the entry is even dollars). * Showing negative amounts (no entry may be a negative amount). * Putting zeros in a box to indicate no dollar amount (when the amount is zero, leave the box blank). * Not showing the cents portion of money amounts. Section Employer Identification Number (EIN) Common Errors made: * Using an incorrect EIN and/or not using the correct format for EIN, which is 10 positions, all numerics and one hyphen in position 3. Format should be 00-0000000. * Using invalid numbers as part of the EIN. The first 2 left most positions cannot be 00, 07, 08, 09, 17, 18, 19, 28, 29, 49, 69, 70, 78, 79 or 89. * Using an invalid EIN. The EIN cannot be 12-3456789 as this number has not been assigned. * Using a prior owner’s EIN. Section Employee Social Security Number (SSN) Common errors made: * Using an incorrect SSN and/or not using the correct format for SSN, which is 11 positions, all numerics and 2 hyphens in positions 4 and 7. Format should be 000-00-0000. * Using invalid numbers as part of the SSN. The first 3 left-most positions cannot be 000, 666, 734 through 749, or 773 through 999. Positions 5 through 6 cannot be 00 and positions 8 through 11 cannot be 0000. For more information on SSNs issued and the most recent numbers allocated, go to http://www.socialsecurity.gov/foia/ssnweb.html. * Using invalid SSNs. The SSN cannot be 111-11-1111, 333-33-3333 or 123-45-6789. * Using an ITIN. The IRS will issue an ITIN to a nonresident or resident alien, if they do not have and are not eligible for an SSN. This is a 9-digit number, formatted like an SSN BUT the ITIN begins with the number “9” and is NOT an SSN. Section Employee Name Common errors made: *Not displaying the name correctly. DO:Match the name on the W-2 to the name shown on the employee’s Social Security card. DO:Enter the employee’s first name and middle initial in the first box and his or her last name in the second box. DO:Separate compound surnames with either a hyphen or a blank space. DO:Connect single letter prefixes, i.e., "O" or "D" with the rest of the surname or join with an apostrophe. DON’T: Include titles in prefixes such as Doctor, Dr., RN, Captain, Mr., Mrs., etc. DON’T: Include titles or academic degrees in suffixes such as Senior, Junior, II, III, MD, Ph.D., CPA, etc. The following are examples of how to properly display names on the W-2. The first column “Name” is an example of a name. The second and third columns show how the name should be correctly entered on the W-2. Name Susan B. Smith JohnsonAnthony D’Angelo (no middle name) Grace H. O’Malley Maria Mercedes Sancho Davila Maria Rodriguez de Perez(no middle name) Maria Elena Rodriguez-de-Perez Diego Garcia-y-Vega (no middle name)Jose Ramon Lopez GonzalesIvan Ramirez Arellano (no middle name) Catherine L. Smith Le May Majed S. El Alami Jason Walks Over Ice (no middle name) Michael Bull Shows (no middle name) Alexann Yellowtail John Tuan Van Tran Xiao Jaun LiuMei Fang Chiang-Hsiao Ming Ou-Young Mary Yao Ching Chao-Chiu Nam Van Tram Mai Thi NguyenMi Jan Kim W-2 (first half of box e) First name, middle initial Susan B Anthony Grace H Maria M Maria Maria E Diego Jose R Ivan Catherine L Majed S Jason Michael Alexann John T Xaio J Mei F Ming Mary Y Nam V Mai T Mi J W-2 (second half of box e) Last name Smith-Johnson or Smith Johnson D’Angelo or DAngelo O’Malley or OMalley Sancho-Davila or Sancho Davila Rodriguez-de-Perez or Rodriguez de Perez Garcia-y-Vega or Garcia y Vega Lopez-Gonzales or Lopez Gonzales Ramirez-Arellano or Ramirez Arellano Smith-Le-May or Smith Le May El-Alami or El Alami Walks Over Ice or Walks-Over-Ice Bull Shows or Bull-Shows Yellowtail Tran Liu Chiang-Hsaio or Chiang Hsaio Ou-Young or Ou Young Chao-Chiu or Chao ChiuTram Nguyen Kim Chapter 5: Reporting Examples for Preparing Paper Forms W-2, W-3 and 941 Introduction This chapter provides examples of proper/improper paper reporting. We included examples of correctly and incorrectly prepared reports. The incorrect reports contain errors that could have been prevented if the software used to prepare them complied with the specifications and edits. Documents covered include: *Form W-2, Wage and Tax Statement; *Form W-3, Transmittal of Wage and Tax Statements; and *Form 941, Employer's Quarterly Federal Tax Return. Inquiries Please contact your regional ESLO, as listed in Appendix B, if you have questions about the examples and information in this chapter. If you have tax questions or questions on tax law and regulations (including Form 941), call the IRS Information Reporting Customer Service Site at 1-866-455-7438 (Toll Free). If you have suggestions for improving this chapter, write to the address on page 20. What is the Social Security and Medicare Tax Amount? You must compute employee withholding and employer matching contributions separately for Social Security and Medicare. The following table shows the Social Security and Medicare tax rates and wage bases for TY 2004. Social Security and Medicare Table of Tax Rates and Wage Bases TY 2004 Employer's Federal Taxable Employee Matching Combined Program Earnings Withholding Contribution FICA Rate Social Security $ 87,900 6.20% 6.20% 12.40% Medicare All* 1.45% 1.45% 02.90% Total FICA Rate 7.65% 7.65% 15.30% *There is no limit on the amount of wages and tips that are subject to Medicare tax. Examples We have provided examples to illustrate various reporting situations. These examples will provide information for the Cabot Cove School District in TY 2004. The scenarios display the following information: *Part I : Employer Wage and Tax Deposit Data - Forms 941, W-3 and W-2; *Part II : Employee Wage and Tax Statements - Forms W-3 and W-2; and *Exhibits: Payroll Register Data Tables. CAUTION: The SSNs and EINs in the examples are intentionally invalid. Please refer to Chapter 4: Common Error's - Dos and Don'ts, for the current list of invalid numbers. EXHIBITS: PAYROLL REGISTER DATA TABLES Cabot Cove School in our example is a local publicly funded school system. The following exhibits are data tables of information from Cabot Cove's payroll register. This information provides the base data for the case scenario. The Cabot Cove School District has three kinds of employees: * Normal fully covered Social Security employees who pay both Social Security and Medicare taxes. Wages and tips of these employees are subject to the 6.2 percent Social Security tax and 1.45 percent Medicare tax (full-FICA employees); * Medicare Qualified Government employees (MQGE) who pay only Medicare taxes because they were participants in an IRS fully approved Public Retirement Plan that existed prior to 1968. Their wages are subject to only the 1.45 percent Medicare tax (MQGE employees); and * Noncovered employees who pay neither Social Security nor Medicare, since they were hired before April 1, 1986. Their wages are exempt from the 6.2 percent Social Security tax and 1.45 percent Medicare tax (FICA-exempt employees). Cabot Cove's EIN is 00-5678910. The information in Exhibit 1 on the next page contains summary employee information from Cabot Cove's payroll register. In addition, the exhibits on pages 64 through 67 illustrate wage and tax data for Cabot Cove on a quarterly basis and page 68 summarizes Cabot Cove's payroll on an annual basis. Exhibit 1 Summary Employee Information Cabot Cove School District Name (first, middle, last) Elizabeth Lee Strosnider Diego Garcia-y-Vega Alfredo Giuseppe Richardo Marano Tae-Jin Kim Jose Schaeffer Lois Germaine Sheppard John R. McNamara1 Mary V. Smith Thomas J. Mason2 Samuel L. Johnson3 Nicole Craig Name as shown on SS Card and Payroll Register Elizabeth L. Strosnider Diego Garcia y Vega Alfredo G. R. Marano Tae-Jin Kim Jose Schaeffer Lois G. Sheppard John R. McNamara Mary V. Smith Thomas J. Mason Samuel L. Johnson Nicole Craig SSN 000-01-0101 000-56-7890 000-67-8901 000-89-0123 000-78-9012 000-90-1234 000-45-6789 000-23-4567 000-78-9012 000-21-0987 000-54-3210 Employment Type FICA FICA MQGE FICA FICA FICA MQGE/FICA FICA-Exempt FICA FICA/Retired FICA/Retired and Active 1 From January 1 through June 30, 2004, John R. McNamara earned MQGE wages subject to only Medicare tax. Effective July 1, 2004, Mr. McNamara was subject to full-FICA coverage. 2 Thomas J. Mason is 45 years old. He elected to be covered by Group-Term Life Insurance (GTLI). His insurance coverage is $150,000. 3 Samuel Johnson is a retired employee who elected to be covered by GTLI after retirement. His insurance coverage is $125,000. ***We are unable to provide the examples for this chapter in this file format. If you would like to access this chapter, it is available on the internet at www.ssa.gov or a hard copy is available on request. Write to; Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 *** Part I: Cabot Cove Case Scenario Wage and Tax Deposit Employer Data - Forms W-2, W-3, and 941 Introduction Part I contains four quarterly (and one annual mock-up) IRS Forms 941 and two Forms W-3 that summarize Forms W-2 information from the Cabot Cove School District. This information illustrates how: *Cabot Cove reported its quarterly payroll and tax deposit data to IRS; and *The annual sum of Cabot Cove's quarterly Form 941 data agree with Cabot Cove's W-3 data for the same calendar year. The annual Form 941 mock-up (page 72) is used to show how you could use a Form 941 or other work sheet to check the accuracy of your reporting for the year. This form balances to (1) the sum of the quarterly Forms 941 (pages 73 through 76) with (2) the sum of the two Forms W-3 (pages 77 and 78). In addition, the first Form W-3 (page 77) includes wage and tax data compiled under the combined reporting option elected by Cabot Cove, which consolidated both the MQGE and full-FICA wages earned by an employee based on that employee's continuing work in employment that became covered under FICA during the year. The Form W-3 on page 77 also includes FICA-exempt employee wages compiled under the combined reporting option for wages not subject to FICA tax (employer's also have the option of grouping FICA-exempt wages and reporting those wages under a separate Form W-3). The second Form W-3 (page 78) contains MQGE wage and tax data only. Cabot Cove's Forms 941 and W-3 contained in Part I are correct examples because they meet the following criteria. Cabot Cove's correct Form W-2 data are displayed in Part II and compared with common reporting errors. Payroll Register vs. Forms 941 *Each quarterly Form 941 balances to (1) the sum of the corresponding employee payroll register data for each quarter and (2) the corresponding annual payroll register summary data for each of the following: a. Total wages, tips and other compensation and Federal income tax withheld; b. Taxable Social Security wages and taxable Social Security tips; and c. Taxable Medicare wages and tips. * In terms of Social Security and Medicare wages and tips, Cabot Cove limited tax withholdings to the applicable Social Security wage base ($87,900) and Medicare wage base (total employee compensation) for TY 2004. *Regarding sick pay, Cabot Cove: a. Treated sick pay payments correctly in terms of identifying wages representing (1) only the percentage of the premium cost of the sick pay plan borne by Cabot Cove as Federally taxable wages and (2) only the first 6 months of sick pay as taxable Social Security and Medicare wages; and b. Properly adjusted the Social Security and Medicare taxes withheld on each applicable Form 941 (line 9) to reflect (1) employee taxes withheld and paid by a third-party payer and (2) uncollected employee Social Security and Medicare taxes. Forms 941 vs. Forms W-3 * The employer's EIN? is valid and the name and address are correct on each type of form; both are reported consistently. * The following data from the Forms W-3 balance to the annual sum of the four quarterly Forms 941: a. Wages, tips and other compensation and Federal income tax withheld; b. Social Security wages and Social Security tips; and c. Medicare wages and tips. *Regarding the Form W-3, Cabot Cove properly reported the income tax withheld by a payer of third-party sick pay in box 14 of the Form W-3, based on sick payments made to an employee by a third-party. Forms W-3 vs. Forms W-2 * Each Form W-3 identifies the proper type of employment in box b for the accompanying Forms W-2. * The sum of all wages and tax withheld on the Forms W-2 balance to the aggregate wages and tax withheld on the Forms W-3. * Regarding the Forms W-2, all: a. SSNs? are valid; b. Employee names are properly printed (i.e., first, middle initial, last) and are consistent with the names printed on their Social Security cards (see Exhibit 1); c. EINs? are valid and both the EIN and employer address are consistently reported on each form; and d. Money amount boxes are properly prepared because they do not contain alpha entries, negative amounts, special characters or punctuation. * In terms of Social Security wages and tips, Cabot Cove limited tax withholdings on the Forms W-2 to the applicable Social Security wage base ($87,900) for TY 2004. * Regarding Social Security and Medicare taxes withheld, the money amounts reported reflect the proper withholding rates of 6.2 percent and 1.45 percent respectively. * Regarding Group-Term Life Insurance (GTLI) over $50,000, Cabot Cove: a. Used the Form W-2 to report the taxable cost of GTLI over $50,000; and b. Treated the cost of GTLI over $50,000 as income and withheld only the FICA tax on that income for current (not retired) employees. * Cabot Cove properly reported nonqualified deferred compensation by: a. Including on the Form W-2 contributions to the plan1 in boxes 3 and 5 and reporting the respective tax withholdings on those contributions in boxes 4 and 6; and b. Including on the Form W-2 distributions from the plan as income in box 1 and reporting Federal income tax withholding on those distributions in box 2. As noted on page 62, the EINs and SSNs in this publication are intentionally invalid. In the examples, they should be considered valid unless specifically noted as incorrect. 1 Contributions that became taxable during the year based on the later of (1) when the services giving rise to the deferral are performed or (2) when there is no substantial forfeiture risk of rights to the deferred amounts. ***We are unable to provide the examples for this chapter in this file format. If you would like to access this chapter, it is available on the internet at www.ssa.gov or a hard copy is available on request. Write to; Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 *** Part II: Cabot Cove Case Scenario Employee Wage And Tax Statements Correct vs. Incorrect Reporting Introduction Part II contains Forms W-2 and various supporting Forms W-3. This information illustrates, on pages 80 through 93, correct versus incorrect reporting for: * Employee names and SSNs; * An EIN; * Social Security wages and taxes; * Medicare wages and taxes; * FICA-Exempt wages and taxes; * GTLI over $50,000; * Third-party sick pay; and * Nonqualified deferred compensation. Part II also illustrates both the split (pages 94-95) and combined (page 96) reporting options for a State or local Government employee who earned wages subject to the Medicare tax only, then became covered for full-FICA effective July 1, 2004. See Chapter 2: Special Considerations for more information on State and local Government, third-party sick pay and agent reporting. ***We are unable to provide the examples for this chapter in this file format. If you would like to access this chapter, it is available on the internet at www.ssa.gov or a hard copy is available on request. Write to; Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 *** Part III: Wiremasters Company Case Scenario Special Reporting Situations Forms W-2, W-3, and 941 Part III provides examples of proper paper reporting to help employers understand and comply with SSA/IRS guidelines. This Part illustrates general guidelines for private employers filing paper Forms W-2, W-3, 941 and 943. Included are examples which reflect special reporting situations such as: 1) deferred compensation; 2) advance EIC; 3) tax shelter contributions to 401(k) plans; 4) fringe benefits; and 5) allocated tips. Specific filing instructions are available in the instructions for filing Forms W-2, W-3, and 941 as well as IRS Publication 15, Circular E, Employers Tax Guide, and IRS Publication 15-A, Employer's Supplemental Tax Guide. IRS forms and publications are available at www.irs.gov or by calling 1-800-829-3676. This section contains four quarterly (and one annual “mock-up”) IRS Forms 941, one Form W-3, and five Forms W-2 from the Wiremasters Company. This information illustrates how: *Wiremasters reported its quarterly payroll and tax deposit data to IRS; *The annual sum of Wiremasters' quarterly Form 941 data should agree with its W-3 data for the same calendar year; and *Wiremasters' W-3 data agrees with employees' W-2 data. Case Scenario The following case scenario illustrates how Wiremasters Company, a private employer, reports its wage and tax deposit data on the Forms W-2, W-3 and 941. In the examples which follow, Wiremasters employed five individuals who have been affected by at least one of the special reporting situations (defined above). The scenario consists of: Payroll Register Data Tables; Employer Wage and Tax Deposit Data (Forms 941), and Employee Wage and Tax Statements (Forms W-3 and W-2). Wiremasters annual Form 941 mock-up (page 102) is used to show how you could use a Form 941 or other work sheet to check the accuracy of your reporting for the year. This form balances to (1) the sum of the four quarterly Forms 941 (pages 103 through 106), (2) the Form W-3 Wiremasters submitted to SSA (page 107) and (3) the five Forms W-2 Wiremasters issued (pages 108 through 112). Exhibits: Payroll Register Data Tables The following exhibits are data tables of information from Wiremasters' payroll register. This information provides the base data for the case scenario. Wiremasters employs individuals who earn wages and tips subject to the 6.2 percent Social Security tax and 1.45 percent Medicare tax (full-FICA employees). Wiremasters' EIN is 00-0198765. The information in the exhibit below contains summary employee information from Wiremasters' payroll register. Summary Employee Information Wiremasters Name (first, middle, last) Edward Eric McNamara Sandra Spencer Randolph Marano Junghee Kim Dominique Dana Johnson Name as shown on Social Security Card Edward E. McNamara Sandra Spencer Randolph Marano Junghee Kim Dominique D. Johnson SSN 000-67-4589 000-78-5690 000-89-6701 000-01-8923 000-50-3210 ***We are unable to provide the examples for this chapter in this file format. If you would like to access this chapter, it is available on the internet at www.ssa.gov or a hard copy is available on request. Write to; Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 *** Appendix A: Employer Checklist The following checklist contains a number of basic steps you should take to help report accurately. This information has already been presented but is consolidated here for your convenience. Recording and Verifying Social Security Numbers * Always ask to see a job applicant's Social Security card to ensure that the name and SSN agree with the information recorded on the job application. If different, ask the applicant to visit a Social Security office to clear up any discrepancies. * Record the name and SSN accurately. * You may keep a photocopy of the employee's Social Security card in the employee's personnel records. Preparing and Submitting Annual Wage Reports * Consider filing electronically using one of SSA’s electronic filing methods. For more information, see page 3 of this document or visit our website, http://www.socialsecurity.gov/employer. * Use either the IRS official Forms W-2 and W-3 or privately printed substitute Forms W-2 and W-3. SSA accepts only 8 ½ inch wide Forms W-2 and W-3. All privately printed, substitute Forms W-2 and W-3 must adhere to the specifications contained in IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3. * Here are several reminders on the specifications for creating substitute Forms W-2 and W-3 and the entry of data on all forms. 1. Margins: Do not print, write or enter any data in the margins of the form(s). These areas are used for control information during SSA's processing. 2. Printing the Form(s): Beginning with TY 2001, forms can be laser printed in black and white; see IRS Publication 1141 for rules and specifications. All other printing of Forms W-3 and W-2 will be in red OCR dropout ink, except for the form identifying numbers '22222' or '33333' at the top and the descriptive information at the bottom (including the tax year) which will be printed in nonreflective black ink. The font used to print data on Forms W-3 and W-2 should be very dark, 12-point courier. Do not use script, inverted, italics and/or dual case fonts when preparing the forms. Do not use inks that contain red pigment on forms that contain employer provided information. 3. Paper Requirements: Paper for privately-printed, substitute forms (cut sheets and continuous pinfeed forms) that are to be filed with SSA must be white 100 percent bleached chemical wood, 18-20 pound paper only, OCR bond with specific weight requirements. The forms must be produced in accordance with the detailed specifications of IRS Publication No. 1141. 4. Data Entry: * Entries on the Forms W-2 and W-3 should be typed or machine printed whenever possible. * The data entered must be presented in clear, dark images to guarantee optically scannable forms. * Insert data in the middle of the blocks and be sure they are separated from other printing. 5. Separating the Forms: Continuous pin-feed forms should be separated at the page perforation into individual 11 inch deep pages (i.e., two Forms W-2 or one Form W-3 per page) in accordance with IRS Publication 1141. When separating forms, keep them in order and submit them in the order printed. Note: Cutting individual Forms W-2 to create two separate forms causes processing problems. 6. Mail all paper Forms W-3 and W-2 (Copy A) to the appropriate address (depending on the mail service used) shown below. If United States Postal Service-Send to: Social Security Administration Data Operations Center Wilkes-Barre, PA 18769-0001 (For certified mail use ZIP code 18769-0002) Other IRS Approved Private Delivery Service-Send to: Social Security Administration Data Operations Center Attn: W-2 Process 1150 E. Mountain Dr. Wilkes-Barre, PA 18702-7997 * Ensure that a Form W-3 accompanies each “Kind of Payer” group of W-2's submitted. * Check that the EIN is the number issued by the IRS and that it is consistently reported on all three Forms: W-2, W-3 and 941. * Balance Forms W-2 with data on the Form W-3 and Form 941 or 943. To assure proper balancing when reporting: 1.The Social Security wages and tips reported on the Forms W-2 should (a) equal the total Social Security wages and tips reported on the accompanying Form W-3 and (b) equal the annual sum of the quarterly amounts reported to IRS for Social Security wages and tips on Forms 941 or 943; and 2.Medicare wages and tips reported on the Forms W-2 should (a) equal the total Medicare wages and tips reported on the accompanying Form W-3 and (b) equal the annual sum of the quarterly amounts reported to IRS for Medicare wages and tips on Forms 941 or 943. * Send Forms W-3 and Forms W-2 (Copy A only) to SSA - not IRS or other destinations. * Make sure the same tax year is shown on both Forms W-3 and W-2 (Copy A). * If you terminate your business, you must file Forms W-2 with SSA by the end of the second month after the end of the quarter for which the final Form 941 is filed. Additionally, you must provide Form(s) W-2 to your employees for the calendar year of termination by the date your final Form 941 is required to be filed. Note: Even if IRS gives you an extension of time to file Forms W-2 (Copy A) and Form W-3, you must still furnish 2004 Forms W-2 to your employees by January 31, 2005, unless you request an extension of time to provide Forms W-2 to employees (see below). * You may request an extension of time for filing Forms W-2 (Copy A) with SSA by sending IRS Form 8809, Request for Extension of Time to File Information Returns, to the address shown on that form. To obtain this form, contact your local IRS office, call 1-800-829-3676 or visit the IRS website at www.irs.gov. For your request to be considered, it must be postmarked on or before the due date of the returns. If approved, you will have an additional 30 days to file. See IRS Form 8809 for more details. Note: Please do not contact SSA to request an extension. * If you file Forms W-2 on behalf of other employers in an "agent" capacity (after filing Form 2678 with the IRS), please remember to: 1. Report on Forms 941 throughout the tax year, the wage and tax data for all employers (including the "agent" if the "agent" is also an employer) for which the "agent" is assuming a reporting responsibility and use the "agent" name and EIN on the Forms 941; 2. Enter the "agent's" EIN in Box b and the "agent's" name and address in Box c of the Forms W-2 (Exception: When an employee's total Social Security wages exceed the taxable Social Security wage base, enter the "agent's" name, "agent for" Employer's Name, and "agent" address in Box c and the "agent's" EIN in Box b); 3.Enter the ["agent" name] in Box f, ["agent" address] in Box g and the ["agent" EIN] in Box e of Form W-3; and 4.Submit all Forms W-2 prepared on behalf of the other employers (and your own if you are also an employer) under one W-3 transmittal. Note: See Chapter 2: Special Considerations for further information on agent reporting. Post-Reporting Activities * Do not submit paper Forms W-2 (Copy A) and/or Forms W-3 that contain the same information submitted to SSA on magnetic media or that were filed electronically. * If, after submitting Forms W-2 and W-3, you identify differences between the Social Security wages/tips and Medicare wages/tips reported to SSA and the information reported to IRS on Form 941 or 943, evaluate whether you should submit correction reports to SSA (Forms W-3c and W-2c) and/or to IRS (Form 941c). Retain copies of this information with your tax records. * Use a Form W-2c and W-3c to correct prior report submissions. Do not use a new Form W-2 or W-3. Ongoing Activities * Remind employees to promptly report any name changes (marriages, divorces, etc.,) by completing and submitting a new SSA Form SS-5, Application for a Social Security Card, to SSA so their earnings can be credited to their earnings record. To obtain a SSA Form SS-5, use the SSA web site; SSA Online at http://www.socialsecurity.gov/ssnumber or call SSA's toll free number 1-800-772-1213 between 7 a.m. and 7 p.m., Monday through Friday. Employers can call the same toll-free number to obtain a supply of SSA Forms SS-5. * Encourage employees to: (a) verify basic Form W-2 information each year, particularly their name and SSN and report any errors promptly, and (b) retain their copy of Forms W-2 to ensure proper credit of earnings to their SSA record. * Remind employees that a W-5, Earned Income Advance Payment Certificate, must be completed each year by the end of the first payroll period. Appendix B: SSA'S Regional Employer Service Liaison Officers NOTE: THESE ARE NOT ALL TOLL-FREE NUMBERS Please contact Social Security personnel for help with questions about how to submit W2s on magnetic media. Refer to the Internal Revenue Service’s (IRS) Instructions for Forms W-2 and W-3 for information on filing paper W-2s/W-3s. If you are an employer, payroll service or an “agent” filing W2s for employers, telephone the IRS Information Reporting Program Call Site at 1-866-455-7438, with employment tax questions. Contact the appropriate State Revenue Agency for questions regarding State reporting. Calls from: Telephone: Alabama (334) 2237013 (Montgomery)* Alaska (206) 6152125 (Seattle) American Samoa (510) 9708249 (San Francisco) Arizona (510) 9708249 (San Francisco) Arkansas (501) 3245130 (Little Rock)** California (510) 9708249 (San Francisco) Colorado (303) 8442364 (Denver) (800) 314-1964 (Denver) Connecticut (617) 5652895 (Boston) Delaware (215) 5974632 (Philadelphia) Dist. of Columbia (215) 5974632 (Philadelphia) FloridaNorth (904) 3988925 Ext. 100 (Jacksonville)* FloridaSouth (305) 6724517 (Miami Beach)* Georgia-North (404) 562-5769 (Atlanta)* Georgia- South (912) 264-0417 Ext. 109 (Brunswick)* Guam (510) 9708249 (San Francisco) Hawaii (510) 9708249 (San Francisco) Idaho (206) 6152125 (Seattle) Illinois (312) 575-4244 (Chicago) Indiana (312) 575-4244 (Chicago) Iowa (816) 9365649 (Kansas City, MO) Kansas (816) 9365649 (Kansas City, MO) Kentucky (859) 294-5153 Ext. 3055 (Lexington)* Kentucky (859) 219-1461 Ext. 111 (Nicholasville)* Louisiana (504) 240-7321 (New Orleans)** Maine (617) 5652895 (Boston) Maryland (215) 5974632 (Philadelphia) Massachusetts (617) 5652895 (Boston) Michigan (312) 575-4244 (Chicago) Minnesota (312) 575-4244 (Chicago) Mississippi (601) 6934859 (Meridian)* Missouri (816) 9365649 (Kansas City, MO) Montana (800) 314-1964 (Denver) Nebraska (816) 9365649 (Kansas City, MO) Nevada (510) 9708249 (San Francisco) New Hampshire (617) 5652895 (Boston) New Jersey (212) 2641117 (New York) New Mexico (505) 346-7244 (Albuquerque)** New York (212) 2641117 (New York) North Carolina (919) 7902877 Ext. 3007 (Raleigh)* North Dakota (800) 314-1964 (Denver) Northern Mariana Isl.. (510) 970-8249 (San Francisco) Ohio (312) 575-4244 (Chicago) Oklahoma (501) 324-5130 (Little Rock)** Oregon (206) 6152125 (Seattle) Pennsylvania (215) 5974632 (Philadelphia) Puerto Rico (787) 7665574 (San Juan)*** Rhode Island (617) 5652895 (Boston) South Carolina (864) 582-1091 Ext. 260 (Spartanburg)* South Dakota (800) 314-1964 (Denver) Tennessee (615) 7815803 Ext.206 (Nashville)* Texas-Central/South (512) 916-5391 (Austin)** Texas Dallas/North (817) 978-3123 (Fort Worth)** Texas-East (281) 4492955 (Houston)** Texas-West (505) 346-7244 (Albuquerque)** Utah (800) 314-1964 (Denver) Vermont (617) 5652895 (Boston) Virgin Islands (787) 7665574 (San Juan)*** Virginia (215) 5974632 (Philadelphia) Washington (206) 6152125 (Seattle) West Virginia (215) 5974632 (Philadelphia) Wisconsin (312) 575-4244 (Chicago) Wyoming (800) 314-1964 (Denver) * or Atlanta (404) 5621315 **or Denver (303) 844-2364 or (800) 314-1964 *** or Puerto Rico and the Virgin Islands, toll-free number (866)-638-6497 Appendix C: IRS/SSA Publications There are other IRS and SSA publications that can help employers file wage reports. Several key publications from each Agency are listed below. IRS Publications * Employer's Tax Guide, Publication 15 (Circular E) * Employer's Supplemental Tax Guide, Publication 15-A * Employer’s Tax Guide to Fringe Benefits, Publication 15-B * Farmer's Tax Guide, Publication 225 * Tax Guide for Small Business, Publication 334 * Federal Employment Tax Forms, Publication 393 * Reporting Back Pay and Special Wage Payments to the Social Security Administration, Publication 957 * General Rules and Specifications for Substitute Forms W-2 and W-3, Publication 1141 * General Rules and Specifications for Substitute Forms W-2c and W-3c, Publication 1223 You can get copies of these and other IRS publications via the IRS website @ www.irs.gov, by contacting the local IRS office listed in your telephone directory or calling toll free 1-800-829-3676 to request this information. SSA Publications * Employers Guide to Filing Timely and Accurate W-2 Wage Reports For copies of this publication, please visit SSA's website at http://www.socialsecurity.gov/employer/pub.htm or contact your regional SSA ESLO listed in Appendix B. * Software Specifications and Edits for Correcting Annual Wage Reports, Publication No. 31-031 You can obtain copies of this SSA publication by: * Reading and printing directly from the Employer Reporting Instructions and Information section of SSA Online, http://www.socialsecurity.gov/employer/pub.htm or by * Writing to: Social Security Administration Office of Financial Policy and Operations ATTN: AWR Software Standards P.O. Box 17195 Baltimore, MD 21297-1195 Appendix D: Chart to Relate Paper W2/W3 Entries to Magnetic Media Reporting and Electronic Filing Data Fields PAPER W-2 BOX 11 Nonqualified Plans MAGNETIC MEDIA OR ELECTRONIC FILING Section 457 Code RW record, location 353-363 Not Section 457 MAGNETIC MEDIA OR ELECTRONIC FILING Code RW record, location 375-385 PAPER W2 BOX 12 A Uncollected Social Security or RRTA Tax on Tips B Uncollected Medicare Tax on Tips C Employer Cost of Premiums for group-term life insurance over $50,000 D Section 401(k) contributions E Section 403(b) contributions F Section 408(k)(6) contributions G Section 457(b) contributions H Section501(c)(18)(D) contributions J Sick Pay not includable as income K Tax on excess golden parachute payments L Non-taxable part of employee business expense reimbursements M Uncollected Social Security or RRTA tax on cost of group-term life insurance over $50,000 N Uncollected Medicare tax on cost of group-term life insurance over $50,000 P Excludable moving expense reimbursements R Archer Medical Savings Account S Simple Retirement Account T Qualified Adoption Expenses V Income from the exercise of nonstatutory stock options W Employer Contributions to a HSA PAPER W2 BOX 13 Statutory Employee Retirement Plan Third-Party Sick Pay PAPER W2 BOX 14 Other PAPER W2 BOXES 15-20 State/Employer’s State ID number, State and Locality wages and taxes PAPER W3 BOX 14 Income tax withheld by payer of thirdparty sick pay MAGNETIC MEDIA OR ELECTRONIC FILING A - Combine code A and B amounts and enter combined total in Code RO record, location 23-33 C - Code RW record, location 408-418 D - Code RW record, location 287-297 E - Code RW record, location 298-308 F - Code RW record, location 309-319 G - Code RW record, location 320-330 H - Code RW record, location 331-341 J - Not required by IRS for magnetic media or electronic reporting. K - Not required by IRS for magnetic media or electronic reporting. L - Not required by IRS for magnetic media or electronic reporting. M - Code RO record, location 67-77 N - Code RO record, location 78-88 P - Not required by IRS for magnetic media or electronic reporting. R - Code RO record, location 34-44 S - Code RO record, location 45-55 T - Code RO record, location 56-66 V - Code RW record, location 419-429 W - Code RW record, location 364-374 PAPER W-2 BOX 13 Statutory Employee - Code RW record, location 486 Retirement Plan - Code RW record, location 488 Third-Party Sick Pay - Code RW record, location 489 PAPER W-2 BOX 14 Other - Not required by IRS for magnetic media or electronic reporting. PAPER W-2 BOX 15-20 State/Employer's State ID number, State and Locality wages and taxes - Not required by IRS for magnetic media or electronic reporting. This data would be needed if creating an RS record for state filing. PAPER W-3 BOX 14 Income tax withheld by payer of third-party sick pay - Code RT record, location 325-339 See IRS Publication No. 15-A Appendix E: Acronyms AWR Annual Wage Reporting BSO Business Services Online DOB Date of Birth EDT Electronic Data Transfer EIC Earned Income Credit EIN Employer Identification Number ESLO Employer Service Liaison Officers EVS Employee Verification Services FICA Federal Insurance Contribution Act FUTA Federal Unemployment Tax Act GTLI Group-Term Life Insurance HSA Health Savings Account IRS Internal Revenue Service ITIN Individual Taxpayer Identification Number MMREF Magnetic Media Reporting and Electronic Filing MSA Medical Savings Account MQGE Medicare Qualified Government Employee NQDCP Nonqualified Deferred Compensation Plan OCR Optical Character Recognition PKI Public Key Infrastructure RRTA Railroad Retirement Tax Act SARSEP Salary Reduction Agreement Simplified Employee Pension SEP Simplified Employee Pension SIMPLE Savings Incentive Match Plan for Employees SSA Social Security Administration SSN Social Security Number SSNVS Social Security Number Verification System TY Tax Year