Avoid being caught off guard by W-2 changes: 5 mid-year steps to take

Year-end may seem a long way off, but some changes related to Form W-2 may require your attention now.

For example, the Social Security Administration (SSA) and IRS have made recent announcements about the form for TY 2023.

Here are five steps to take now:

#1 Go through SSA’s new login process

Before accessing Business Services Online (BSO) for TY 2023 – whether for the first time or as a return user – you’ll need to log into a separate account. This is to verify your identity.

You can pick from among three accounts:

• a Social Security online account (such as a my Social Security account created before September 18, 2021)
• a Login.gov account, or
• an ID.me account.

If you already have credentials for one of those accounts, that’ll make gaining access to BSO a little quicker. SSA has provided information for employers about getting started.

During the April IRS Payroll Industry Call, a representative from SSA noted the agency is working to fix road bumps with the new process.

Once you’re logged in to BSO, you’ll be able to file Forms W-2 electronically, whether you’re doing wage file uploads or using W-2 online.

Note: In addition to getting your BSO login information ready to go, if you have any 1099s to e-file, you may need to register with IRS to use the Information Returns Intake System.

#2 Check if lower e-filing threshold applies

On February 23, 2023, IRS released final regulations, suddenly lowering the e-filing threshold from 250 to 10 returns.

In addition, now employers will need to aggregate forms to determine if they’ve met that threshold. That includes W-2s, 1099s and many other forms.

The final regulations will affect people in a variety of roles within each company – those responsible for:

• withholding returns
• certain information returns
• partnership returns
• corporate income tax returns
• unrelated business income tax returns
• registration statements
• disclosure statements
• notifications
• actuarial reports, and
• excise tax returns.

Some employers may decide to streamline the systems they use to make e-filing more manageable.

#3 Count the cost of higher IRS penalties

IRS recently updated its penalty amounts. As you might have guessed, they’ve increased.

For Forms W-2 that are due in 2024 – i.e., TY 2023 forms – those amounts are:

• up to 30 days late – $60 for each form (was $50)
• 31 days late through August 1, 2024 – $120 (was $110)
• after August 1, 2024, or not filed – $310 (was $290), and
• intentional disregard – $630 (was $580).

#4 Get consent to send W-2s electronically

As in past years, you need employees’ consent to furnish W-2s to them electronically.

While you may have received consent for TY 2022, be aware that employees have the right to revoke that consent for TY 2023 or a future tax year.

Furthermore, IRS has a list of requirements employers must meet to furnish Forms W-2 electronically. For example, employees must be informed that they’ll receive paper Forms W-2 if they don’t consent to receive the forms electronically. But that’s just the beginning – the complete list can be found in IRS Publication 15-A, Employer’s Supplemental Tax Guide.

#5 Mask SSNs on employees’ copies

If you haven’t yet truncated employees’ Social Security numbers (SSNs) on their copies of Forms W-2, consider doing this for TY 2023.

IRS doesn’t require it. But it’s a simple way to show employees you care about protecting their sensitive information.

Use X or * to mask the first five digits of the SSN, so only the last four digits of the identifying number can be seen. The truncated format – for example, XXX-XX-1234 or ***-**-1234 – was first permitted for TY 2020 Forms W-2.

Caution: You can’t mask SSNs on copies filed with IRS or with state or local governments.