Are you prepared for the end of the year? Paychex gives a company compliance checklist to advocate being more prepared for end-of-year taxes.
Confirm employee name and address list. Report employee changes to your payroll provider by the assigned due date. Ensure that you have the necessary federal and state withholding forms available when reporting new employees. Verify the correct name and social security number (SSN) for each employee. An SSN/name mismatch affects the employee’s social security wage benefits; wages reported on Form W-2 with a mismatch error will not be credited to that employee’s personal earnings record. Instead, the wages will be housed in a “suspense file” until the error is corrected. If the error is not corrected, the wages will never be credited to that individual.
Reminder/Note: The IRS may charge employers a penalty of up to $100.00 for each return or Form W-2 that has a missing or incorrect SSN or federal employer identification number (FEIN). Your service provider cannot file your federal Forms W-2 electronically if a substantial percentage of the SSNs are missing and you have more than 10 employees.
Year End Bonus checks. As we begin 4th Quarter, organizations should start planning for the end of year bonus checks. Late reporting of bonus checks and associated tax deposits can result in penalties and fines from the I.R.S. and state tax authorities. Your payroll provider may also charge fees associated with amending returns after the 4th quarter returns have been prepared and filed.
Report other amounts on Form W-2, Box 14. The IRS allows employers to use Form W-2, Box 14 (Other), to report certain adjustments to an employee’s pay (e.g., charitable contributions); these can be set up to print in Box 14. Use the following guidelines when choosing a title for the adjustment:
• Only the first five letters of the adjustment (earnings or deduction) will print in Box 14.
• Be descriptive. For example, “Misc” may not clearly substantiate a charitable contribution.
• The adjustment title should be reviewed before processing Forms W-2.
Report Third-Party Sick Pay (Disability Payments). By law, insurance companies have until January 15, 2013, to notify employers of any disability insurance benefits paid to employees during the calendar year 2012. Since third-party sick pay affects all fourth-quarter and year-end returns, including Forms W-2, the processing of returns can be delayed if sick pay is reported after the deadline date for year-end information.
Health Care Reform Compliance. As part of the Health Care Reform law, the Form W-2 Reporting Provision requires certain employers to report the total value of an individual employee’s health benefits on their Form W-2. The goal is for employees to gain awareness of the true cost of health coverage.
Effective for tax year 2012, the following applies:
• Employers that filed 250 or more Forms W-2 for the previous tax year must include the cost of employer-sponsored health coverage on Forms W-2;
• Employers filing less than 250 Forms W-2 are not required to report the cost of coverage.
Some provisions contained in the Form W-2 guidance include:
• The healthcare amounts reported are strictly informational and not taxable to the employee or employer.
• Employers are not required to issue Forms W-2 to non-employees currently receiving health coverage (such as retiree or surviving spouse) in order to report the health coverage amounts.
• The aggregate cost of employer-sponsored health coverage will be reported in box 12 of Form W-2 using the code “DD.” This amount will not need to be reported on Form W-3.