Filing taxes is an essential part of the end-of-year process for businesses and employees alike. It’s important to get it right so that everyone involved can benefit from accurate taxation and avoid any potential penalties or fees. Unfortunately, mistakes on W-2 forms are common, leading to unnecessary stress and wasted time. This article will explore some of the most common W-2 mistakes and offer advice on how to correct them. Common W-2 Mistakes: Not Knowing the Difference Between W-2 and 1099-NEC We have already covered some of the most common 1098, 1099-MISC, and 1099-NEC mistakes and how to avoid them in a previous blog article. But today we wanted to talk about the difference between a W-2 and 1099-NEC employee, as well as the importance of catching and correcting mistakes on W-2 information returns before you’ve filed or reached out to a tax accountant. As most of us know, W-2 employees are employed directly by an organization. Those workers who often classify themselves as contractors or freelancers, and don’t have consistent work, pay, and benefits provided by the companies they work with will more likely be classified as 1099 workers. And this is one of our first hidden mistakes that many businesses and employees are unaware of or overlook and that’s the misclassification of employees. Because 1099 workers are responsible for paying more payroll and related taxes (like Social Security and Medicare), it benefits employers to not classify them as full-time W-2 employees. However, independent contractors who work via 1099 and W-9 forms are also much less beholden to the companies they are serving. If this is not the relationship you have with the people you are employing, then you need to classify them as W-2 employees, which keeps you in compliance and also allows for an easier time when it comes to running payroll. Not Double-Checking Employee Info Your employee tax information and details can change at any time throughout the year. Don’t wait until …
W-2 Compliance Insights
We are almost at the deadline for sending W-2s. If you’ve already sent them out, these W-2 compliance tips will be great for 2022 year-end. If not, you have a little bit of time left to tie things up and get them out to your employees. Employer Responsibilities As the employer who will be sending out the W-2s, you’re responsible for all the copies, as well. Copies B, C, and 2 are to be sent to your employee. Copy A goes to the Social Security Administration, Copy 1 is to be submitted to the state tax authority if applicable, and Copy D is for you to keep with your employer records. A single employer is only required to submit one W-2 per employee, even if the employee in question has worked in multiple roles. The only instances in which an exception would be made are if a single employee worked in multiple roles across different locations or if company ownership changed mid-year. In these special cases, W-2s must be issued for each different EIN (Employer Identification Number) that said employee worked for. Compliance and 2022 Changes The IRS recently published the Employer’s Tax Guide, which helps identify the items that employers are responsible for this tax season, as well as highlights the latest updates as they pertain to your business and operations. One update addresses the COVID-19 related credit given for sick and family leave wages. This credit is limited to leave that was taken after March 30, 2020, and before October 2021. The COVID-19 related employee retention credit has expired, and COBRA premium assistance payments credit is limited to coverage periods on or after April 1, 2021, through coverage periods that began on or before September 30, 2021. There are also some updates and reminders regarding Social Security and Medicare Tax, as well as deferment amounts of the employer share of these taxes. All of these insights can be found in the IRS 2022 Publication 15. Compliance Tips for 2022 Filing This year, employers are able to …
I Filed Form 1099 or W-2 With Errors. Now What?
If you filed a Form 1099 or W-2 with errors, then it’s critical that you file a correction ASAP to avoid additional fines and other penalties from the IRS. Step 1: Recognize Your Mistakes The most common errors include the following: Filing the wrong form type Reporting the wrong amount Reporting the wrong TIN or not including one at all Using a form for the wrong tax year Not using the correct form from the IRS (you cannot download or copy it) Tip: If the error is less than $100 for income or less than $25 for withholding, then you do not need to file a correction. Also, find out more about deadlines here. Step 2: Fix Your Errors If you filed the wrong form, either type or year, or the wrong amount, then you can easily file a correction form with the information you already have. If you reported an incorrect TIN or forgot to include one at all, then you need to speak to your contractor or employee to receive the correct TIN. Once you do, update the form and file the correction. You should also update the TIN in their personnel file. Tip: Use eFile360’s TIN Checking service to avoid this penalty. If you made a different error and need assistance preparing the correction, we recommend seeking out an accountant. Our team can answer some of your questions, but we are not a team of tax advisors and cannot provide any tax advice. Please note that filing a correction does not necessarily mean that you will not be penalized or fined by the IRS. Filing a correction may only lower the amount you are penalized, but it is worth it to do so, not only for financial reasons, but also because those forms affect your employees’ tax returns. Step 3: File a Correction for Each Form with Errors Once you have the correct information for the 1099 or W-2 form, you are ready to file a correction. Efile360 offers this service. If you are filing via paper, you will also need to file Form 1096. If you are e-filing, you do not need to include …
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