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If you’re reading this, you may be dealing with one or more incorrect W-2s for your employees… leaving you wondering what led to this and what happens next.
As a business owner, you might face fees to amend forms and payroll filings, and you’ll owe penalties and interest if amendments make you pay your taxes late. But the largest hit can be the loss of employee trust. So how do you fix things?
At CSI Accounting & Payroll, we’ve handled payroll for decades. We’ve talked to thousands of businesses about errors from former providers, and we’ve developed preventative measures and fixes for our own service. Here’s what owners want to know about incorrect W-2s:
- How does my payroll provider make my W-2s, and what are common mistakes?
- Depending on when the errors are caught, how are W-2s corrected?
- How can W-2 errors be prevented?
How Providers Make W-2s & Common Mistakes
After a year of processing payroll, all your provider has to do is push a button for correct W-2 Forms… right? Not quite! They also need to confirm employee information and get any manually input year-end amounts from you. You should get a list of information your provider needs you to provide or confirm by a certain deadline.
So, what mistakes do we see? Generally, payroll data itself has a low error rate. The top three issues on W-2s are:
- Deduction items and pay items are incorrectly marked as pre-tax, post-tax, or subject to unusual tax rules.
- Year-end inputs were not received from clients.
- Employee Social Security numbers are wrong.
After generating these forms, payroll providers will file them with federal and state agencies and provide copies to you or directly to your employees. So, when are these mistakes caught? Let’s talk about it in the next section.
How Errors Are Caught & Corrected
Mistakes on W-2s can be noticed at many points, including:
- By your payroll provider, immediately.
- By you, before distributing them to your employees.
- By your employees, before tax preparation.
- By your employees’ accountants, during tax preparation.
- By the IRS, when processing the tax return.
If the error is caught before taxes are filed, contact your payroll provider to have them fix the issues. They will use a Form W-2c to amend the incorrect Form W-2. If payroll taxes are also incorrect, they may need to file amended Form 941s. Most payroll providers will charge you for these fixes, even if they were doing your payroll during the period. (But not CSI!)
If taxes are already filed before the issue is noticed, your employee will need to file an amended tax return (which will cost extra). Your payroll provider can tell you if other amendments are also required.
How to Prevent W-2 Errors
A great way to explain preventing W-2 errors is to talk about our process at CSI. Here it is!
First off, our onboarding process focuses on accuracy. We have significantly lower turnover than large payroll providers, so our staff is fully trained to set up deductions and pay items correctly (a major source of errors from other providers) right from the start.
Then, we carefully review regular payroll runs, ensuring the data we collect year-round is accurate, too. We ask questions when something looks unusual, whereas large providers assume you know what you’re doing.
Before year-end, we send our clients a checklist. Anything that could affect W-2s will be addressed. It will contain deadlines for things like validating employee information, reporting special procedures, and reporting additional compensation and benefit information.
If an issue arises with W-2s we created, we find the root issue and fix things quickly. We don’t charge to correct our mistakes, but if clients miss deadlines or provide incorrect information, the cost for amendments is on them. It’s our goal to avoid this entirely, and we make many attempts to get things right the first time. We pride ourselves on having very few issues with W-2s, unlike our big-name competitors.
Get W-2s Right the First Time!
Now that you know how W-2s are made, common errors on them, when errors can be caught, how they’re corrected, and how issues are prevented at CSI Accounting & Payroll, are you ready to check out our payroll services?
To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what your per-process payroll costs may be by clicking the image below:
