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Changes to 2020 W-2 Filing Information for Employees Participating in Payroll Tax Deferral Program for 2020

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December is here and it is a good idea to do a review of your employees W-2 information prior to processing your final payroll of 2020. You might consider reviewing the following:

  • Confirming your 2% shareholder Box 1 wages are calculated properly and tax federal withholding is the only tax affected by on these earnings.  These earnings are excluded from box 3 (social security) and box 5 (Medicare) earnings.
  • 401K deferral does not exceed maximum allowed.
  • Employee benefit deductions are the correct amounts and taxed properly.
  • Employees that participated in 2020 deferred payroll tax program (Box 4 will look different in 2020 for these employees).

The IRS said that if employers have deferred the employee portion of Social Security tax when reporting total Social Security wages paid to an employee, on the W-2, they should include any wages for which they deferred withholding and payment of employee Social Security tax in box 3 (Social Security wages) and/or box 7 (Social Security tips). However, Box 4 (Social Security tax withheld) will not include any deferred employee Social Security taxes that have not been withheld.

Any Social Security tax deferred in 2020 that is withheld in 2021 and isn’t reported on the 2020 Form W-2 should be reported in box 4 (Social Security tax withheld) on Form W-2c, Corrected Wage and Tax Statement. The deferral payback period is January 1, – April 30, 2021. On Form W-2c, employers should enter tax year 2020 in box c and adjust the amount previously reported in box 4 (Social Security tax withheld) of the Form W-2 to include the deferred amounts that were withheld in 2021, per the IRS. All Forms W-2c should be filed with the Social Security Administration, along with Form W-3c, Transmittal of Corrected Wage and Tax Statements, as soon as possible after employers have finished withholding the deferred amounts. You will want to confirm with your full-service payroll provider if they will be completing the W-2c filings and reporting for you.

You should also confirm that your 941 filings for Quarters 3 and 4 are on the revised 2020 Form 941, Employer’s Quarterly Federal Tax Return. Employers will report the deferred amount of Social Security tax on lines 13b and 24 of the form. The instructions for the form have also been updated to explain these rules.

Here are the links to the instructions for 2020 forms W-2 and 941.

For more information regarding the payroll tax deferral program, please contact your Berntson Porter representative at 425-454-7990. We are here to help!

Berntson Porter is here to help businesses navigate these challenging times. Visit our Resource Center for up-to-date information about COVID-19 legislation that impacts you and your business.