January 31 is the deadline for distributing forms W-2 and 1099-MISC to employees and contractors. You are required to meet that deadline so that your employees have enough time to file their personal income tax returns by April 15. But what happens if employees do not get their forms on January 31?
There may be very valid reasons for missing the January 31 deadline. Unfortunately, the IRS is not very gracious in this regard. Along with industry experts, they advise taxpayers to do certain things if January comes and goes without W-2's being distributed.
If you missed the deadline, here are four things your employees might do:
1. Contact the HR Department
Contacting the HR department is the first and most obvious way to resolve not receiving W-2 forms on time. Expect at least some of your employees to make contact. Assuming you did distribute the W-2s as required, such contacts would be an indication that something went wrong. Somewhere along the line, a W-2 was prevented from reaching the affected employee.
2. Contact the IRS
Believe it or not, the IRS urges taxpayers to contact them if they don't receive their W-2s. In fairness, they recommend contacting the employer first and then waiting until the end of February. If February ends and the employee still doesn't have his or her W-2, the IRS Taxpayer Assistance Center is there to help.
What happens next? The IRS typically attempts to contact the employer. This is when IRS agents also warn employers of the penalties they face for missing the January deadline. The IRS also offers to send form 4852 directly to employees as a substitute for form W-2.
3. File Returns without W-2s
Federal law requires taxpayers to file their tax returns no later than April 15 even if they do not have W-2 forms in hand. That means even if you missed the deadline, your employees are still going to file their returns one way or another. If you still haven't distributed forms by April 15, all the returns filed by your workers without W-2 forms will be an instant red flag to the IRS.
4. File Form 1040X
In the event employees are forced to file their tax returns without W-2s in hand, they may have to file form 1040X at a later date. What is this form? It is an amended tax return that includes either the late W-2 form you eventually furnished or the substitute form 4852.
Regardless of the wage information form used here, the point is that your employee is forced to file an amended tax return as a result of you failing to provide a W-2 form on time. It is extra work for the employee.
Identify and Fix the Problem
By the time you read this post, the January 31 deadline may have already passed. If it has, and you had trouble getting W-2 and 1099-MISC forms out to employees, it is time to take a step back and honestly assess what is going on. It's time to identify and fix the problem so that it isn't repeated next year.
Some failures are the result of outdated software that is too difficult to use. Other times the issue is a failure of the HR department to update employee records at the close of the previous year. Still other times it is a simple matter of ignorance.
Regardless of the issue, BenefitMall is here to help. As a third-party payroll and benefits administration provider, we can handle all of this for you in future years. Contact us to learn how.