Everyone knows about Form W-2, but often only long-time business owners and seasoned tax professionals are aware of Form W-3. Although it’s a relatively simple form, it can often be a point of confusion for new business owners and tax professionals. Here’s what you should know to help your clients accurately complete and file Form W-3.
What is Form W-3 used to report?
Form W-2 reports the income and taxes withheld for a single employee, whereas Form W-3, known as the Transmittal of Wage and Tax Statements, reports the total income paid and taxes withheld for all employees.
In other words, Form W-3 adds up the figures reported on all an employer’s Form W-2s. This report is then sent to the IRS and Social Security Administration (SSA).
Who must file Form W-3?
Each employer required to file Form W-2 must also file Form W-3. Even household employers with a single employee (such as a nanny) must file Form W-3. However, payments made to contractors reported on Form 1099 do not need reporting on Form W-3.
What’s the deadline for filing Form W-3?
As with Form W-2, the deadline for filing Form W-3 is always Jan. 31.
This year, many employers will need to register for the Business Services Online (BSO) portal early to make the filing deadline.
Effective Sept. 19, 2022, employers registering to use the BSO for the first time or registering to use a new part of the BSO will receive an activation code in the mail. This code is meant to increase data security and could take up to two weeks to arrive. Ideally, your clients should register for the BSO before the beginning of January to ensure they have plenty of time to receive the code and file on time.
How to complete Form W-3
Most information needed on Form W-3 is relatively straightforward. Still, many employers are unsure about a few sections of the W-3, specifically Boxes A and B, which ask for the W-3 Control Number, Kind of Payer, and Kind of Employer.
Box A: W-3 Control Number
This box is optional and most employers can leave it blank. Employers with more than 50 employees who file more than one W-3 may want to use it to “organize” their W-2s into different categories to simplify bookkeeping. They’ll enter the matching W-3 control number on each W-2.
Box B: Kind of Payer/Employer
Here, your client will need to check a box to specify what type of Payer/Employer they are. If they file IRS Form 941, Employer’s Quarterly Federal Tax Return, they will check box 941.
Employers who file a Form 944 instead, meaning they owe less than $1,000 per year in employer taxes and file annually instead of quarterly, should check box 944. Household employers should check the “Hshld. emp.” box.
In the “Kind of Employer” section, most employers whose businesses are not a 501c non-profit or government entity will simply check “None apply.”
Boxes C-H ask for identifying information about the employer, such as their address, Employer Identification Number (EIN), and the total number of W-2s.
The remaining boxes total wages paid and taxes withheld, as reported on all of the employer’s W-2s.
How to file Form W-3
You have three options for filing Form W-3, though the IRS strongly recommends using one of the two electronic filing options. Employers with more than 250 employees must file electronically.
W-2 Online through the BSO Portal
An employer may use the fill-in forms to file up to 50 Form W-2s at a time electronically through the Business Services completed automatically. In other words, they don’t have to worry about filling out Form W-3.
File Upload through the BSO Portal
Employers may upload wage files to the SSA that were created using payroll or tax software if the files meet the SSA’s Specifications for Filing Forms W-2 Electronically (EFW2).
If you’re filing form W-3 by mail, you’ll need to order the form from the IRS website. It must be printed in a special ink that is machine-readable, so printing it at home or in the office could result in penalties.
Please Note: Form W-3s should always include Copy A of all relevant Form W-2s. Form W-3 should never be mailed alone, nor should it be sent if you filed W-2s electronically.
For further questions, please refer to the IRS Instructions for Forms W-2 and W-3.
This article was last updated on 12/22/2022.