(Newswire.net — May 20, 2022) –Payroll taxes are those that are levied on the wages of employees, they are often used as a source of funding for government programs like Medicare and Social Security. In fact, payroll taxes are one of the U.S. government’s largest sources of revenue, comprising 23% of its aggregate local, state, and federal amounts. As a result of the importance of this revenue source, heavy sanctions are placed on businesses for missing or mispaying payroll taxes.
Therefore, it is important that businesses understand all the steps they need to complete so that they can submit their payroll taxes correctly and by the deadline. One of the most common steps in the process that causes businesses to trip up is Form W3, particularly due to its extremely close resemblance to Form W2. Thankfully, this article will cover everything small businesses need to know about this document.
Form W3 Basics
Put simply, a Form W3 (or Transmittal of Wage and Tax Statement as it is referred to on the IRS website), is a short document that summarizes the accumulated employee information contained in all the Form W2 documents a company’s employees had to fill out. This information includes every employee’s net wages, total medicare, social security, federal and state and income tax withheld, and the total number of employees, among others.
The purpose of summarizing this information in one brief document separate from the Form W2 is so that a Form W3 can act as a verification for the information provided on the Form W2 documents it submits. Furthermore, employers should refrain from copying the information directly from the Form W2 documents their employees submit and instead refer to their own internal records to ensure that any mistakes are highlighted and corrected.
This is where the main differences between these two documents lie: in who must fill out the form, and to who each form must subsequently be sent off. Form W2 is sent to an array of different people, including the Social Security Administration (SSA), the company’s own records, and the tax departments of any local, city, or state taxes employees must pay. In contrast to this, the employer must only send Form W3 to the SSA.
As long as a business has at least one employee working for them (i.e. and thus must submit a minimum of one Form W2 document), they will concurrently be required to file Form W3 alongside this.
How To Submit Your Form W3
The only details a business needs to hand in order to complete a Form W3 are its EIN, its legal name, and its postal address. All other necessary information can be found in its own payroll records, which should shine a light on each of its employee’s aggregate earnings as well as the taxes and deductibles for each employee too.
It is of paramount importance that businesses become comfortable with performing all of these steps by themselves, as they will be required to do so on an annual basis. Indeed, since the incorrect filling out of these details can incur some heavy fines for a business, it is important they make sure to file these forms diligently.
There are two broad options for businesses to complete and file these forms, either by themselves online or by mail, or through an accountant who handles it all for them. If a business chooses to do it itself and intends to submit its forms online, it should be aware that it must sign up for the SSA’s proprietary BSO platform in order to do so.
Also worth noting is that it is mandatory for businesses that employ over 250 workers to submit their Form W2 and W3 online. Hiring an accountant is always a good alternative, given that they are professionally trained to handle these duties, though the cost can be quite painful – particularly for smaller businesses.
Concluding Remarks
It is absolutely imperative that businesses submit their Form W3 correctly so as to not incur heavy fines. Despite their similarity, there is a marked difference between Form W2 and W3, primarily in the number of parties that each document must be sent to. For more information on this topic, LLC University provides a great resource on how to file a W3 Form.