Did you catch all these IRS changes for TY 2021 Forms W-2?

With such a steady stream of IRS changes in TY 2021, it’d be easy for your Payroll team to miss something, under deadline pressure for distributing and filing Forms W-2.

So, here’s a checklist you can pass along to help ensure your company has caught some of the most significant, recent developments.

Before you send W-2s out the door, make sure you’re in compliance.

Forms W-2 checklist you can use

Filing electronically. Ever since IRS released proposed regs on July 23, 2021, it’s been crickets regarding the new electronic filing requirement.

During the January Payroll Industry Call, when asked about the e-filing threshold drop from 250 to 100 returns, IRS said it still didn’t have any specific guidance. Note: The threshold would apply to the aggregate number of Forms W-2, Forms 1099, Forms 1095 and other forms.

Reporting dependent care benefits in box 10. If your company provided dependent care benefits to an employee, show the total amount in box 10. Include any amount above your plan limit in boxes 1, 3 and 5.

The allowable limit increased from $5,000 to $10,500 for 2021. Some employers may receive an errata sheet from IRS to include with W-2s so employees have the updated numbers. During the Payroll Industry Call, IRS said distributing the errata sheet is encouraged, but it’s not mandated.

Including qualified paid sick and family leave in box 14. IRS requires this step if your company provided COVID-related leave and claimed a tax credit for that.

If you don’t have enough space in box 14, you can send employees a separate statement.

Truncating Social Security numbers (SSNs). You first got the green light to shorten SSNs last year-end, and that’s allowed again for TY 2021 Forms W-2.

Payroll pros wanting to go the extra mile to protect employees’ info have the option. IRS allows truncation on employees’ copies only.

Reconciling Forms W-2 and W-3 with Forms 941. Employers may encounter more discrepancies than usual when reconciling W-2s and W-3s with 941s this year-end due to the many COVID-related changes.

One example: If employees took qualified sick leave and family leave before April 1, 2021, those wages weren’t subject to the employer portion of Social Security tax.