Forms W-2: Time to find (and fix!) errors for this tax year

If you can uncover and correct any mistakes before you run Forms W-2 for Tax Year 2022, you’ll save yourself some time.

Plus, employees will thank you (well, maybe not, but at least you can head off some complaints).

Best bet is to pore over year-to-date data before your last payroll of 2022. That’ll help you avoid the complications of crossing over tax years to fix errors. But even if you miss that window, it’s worth finding some time for doublechecking before you distribute the wage and tax statements to employees and file them with SSA.

Here are some areas to watch out for:

A careful look at W-2s

IRS has a long list of payments – 23 to be exact – that employers should include in box 1. You probably don’t have that memorized. So, take a moment to review the list which is found on page 16 of the 2022 General Instructions for Forms W-2 and W-3.

Employees may be caught by surprise when they see that box 1 contains more than their annual salaries and box 2 shows more tax withheld than they anticipated. So, it’s beneficial to communicate with employees before they receive their W-2s. Let them know what types of earnings they’ll find on the form. Taxable fringe benefits, for example, may require some explanation.

Moving on through the form, confirm that you haven’t entered amounts in box 3 (Social Security wages) that should be entered in box 7 (Social Security tips) or box 8 (allocated tips).

Consider whether any employees have box 1 compensation exceeding $147,000 in 2022. For those employees in particular, pay special attention to box 3. The amount of wages in box 3 shouldn’t be more than $147,000 because that’s the taxable wage base for 2022. To be more specific, box 3 and box 7 combined can’t exceed $147,000. Also, doublecheck box 4, remembering that Social Security tax withheld should be capped at $9,114 for 2022.

Note: SSA recently announced the 2023 Social Security taxable wage base, so you can make sure your payroll system is updated for next year.

Does box 5 total more than $200,000 in Medicare wages for certain employees? Then check box 6 to verify that you’ve withheld the Additional Medicare Tax of 0.9% on wages that exceed that amount. The rate would be computed as follows: 1.45% + 0.9% = 2.35%.

So, if during 2022, your company paid an employee $250,000 in wages subject to Medicare tax, you’d withhold 1.45% up to $200,000 and 2.35% for the remaining wages earned through the end of the year.