Penalties for Employers That File W-2 Forms Late with the IRS

It isn’t all that common for employers to forget to file their W2 forms with the IRS by the January 31 deadline. But it can happen, and if it does, you need to know what you’re dealing with.

Non-compliance is dealt with pretty strictly by the IRS because they want to discourage it, so unfortunately, there will be penalties for late filing. We look into the kinds of penalties you can expect to pay, how long you have to correct the problem, and what steps you can take to avoid penalties in the future.

Key Takeaways

• Employers should file W2 forms with the IRS by January 31 to avoid paying penalties.
• Penalties for late filing range between $60 - $340 per form. Intentional disregard fines are $680+ per form.

Why is it important to file the W2 form by the deadline?

The W2 form is the primary wage and tax statement required by the Internal Revenue Service (IRS) and the Social Security Administration (SSA). The statement shows the income tax, social security tax, and medicare tax that have been withheld from employee wages during a certain tax year. These federal agencies reconcile wage reporting and tax withholding figures based on these reports.

If the problem extends to the employer not providing a W2 to the employee by the deadline, then personal tax returns cannot be completed either.

One can imagine the disruption it causes when employers do not submit W2 forms on time. Not only can the IRS and SSA not conclude the tax year promptly, but employees have to submit alternative forms, and can also pay late filing penalties if they are not aware of alternate procedures.

Are you missing deadlines because you’re managing multi-jurisdiction payroll and W2 submissions? If so, you could explore an Employer of Record, like Rivermate (especially if you have remote employees). We will handle regulatory filings on your behalf. Speak to one of our HR experts about how we can partner with you.

Why must you pay penalties for late W2 submissions?

From our discussion, the implications of late W2 returns become clearer. Because it causes disruption to multiple government processes, the IRS wants to discourage widespread non-compliance. Penalties are a punitive response for non-submission or late submission. The theory is that when people feel it in their pockets, it deters future mistakes.

For this reason, it is unlikely you will avoid paying penalties for late W-2 submissions. The IRS is pretty consistent in applying penalty rules. For serious and continued transgressions, the IRS may even implement criminal penalties, but such cases can be avoided by simply staying compliant.

Exact form W2 filing deadlines

The main submission deadline for the W2 is January 31 of each year. If this day falls on a weekend or public holiday, it is generally the first working day after this date. The IRS publishes exact deadlines for each tax season, and this deadline applies to both paper and electronic submissions. Employers must submit W2 employee copies by the same date.

Anyone who plans to request an extension for the filing of a W2 to the SSA must do so before the deadline. This is done using Form 8809, which applies to the filing of information returns (W2, and 1099-NEC for independent contractors included). Extensions are for a period of 30-days and are only granted for specific reasons, such as natural disasters, fires, or serious illness.

Potential penalties for late W2 submissions

Once the January 31 deadline (or other published date) passes, penalties are automatically triggered on outstanding W2 forms. This is why timely filing is so crucial. Once you begin to incur penalties, you can expect that they will grow until you submit the necessary information. They are not likely to be waived, and further delays can lead to more serious action being taken.

Penalties are calculated per form and can be adjusted for inflation. Information return failures are penalized based on a tiered structure. Basically, this means the longer you don’t submit the forms, the more you pay in penalties.

Time Limit	Penalty	Maximum penalty
Filed within 30 days of the deadline	$60 per form	$664,500 per year...$232,500 for small businesses.
31 days - August 1	$130 per form	$1,993,500 per year...$664,500 for small businesses
After August 1	$340 per form	$3,987,000 per year...$1,329,000 for small businesses
Intentional disregard	$680 per form	No upper limit

The IRS determines ‘intentional disregard’ using several criteria, including:

• Whether you have a history of filing late W2 submissions.
• How quickly the problem was addressed once it was determined that W2 submission was late.
• Response to IRS requests to rectify the problem.
• Whether there was an intentional business decision made to skip W2 submission to avoid other financial obligations. This is viewed as very serious and can attract separate penalties, fines, or charges.

If a business can show a serious reason for non-compliance (a natural disaster, death of the business owner, serious illness, etc.), or that a tax professional provided the wrong information, then the IRS will not classify the non-compliance as intentional disregard.

Other reasons for penalties related to W2 forms

There are a number of other reasons that penalties can be issued against W2 submissions. These are usually mistakes related to the accuracy of the submission, and are issued because they interfere with the reporting that is done by federal authorities.

• Missing tax information numbers (TIN).
• Missing required information.
• Filing paper forms when you’re required to do e-filing.
• Failing to provide employee copies.
• Filing fraudulent forms.

An employer could face additional costly penalties depending on what has occurred. For instance, incorrect information can be amended using forms W2c and w3, and should be done as soon as possible after the deadline. But if the IRS identifies potential fraud, then the business faces civil penalties and potential criminal prosecution.

For businesses managing remote employees (locally or globally) W2 compliance can be complex. By partnering with an Employer of Record, you can shift regulatory compliance away from your business. Speak to a Rivermate expert about how this would work.

What you can do right now to rectify late W2 filings

If you’ve missed the W2 deadline, it calls for decisive action. Don’t wait until the next tax season. If you can rectify the problem within 30 days of the deadline, you will pay the lesser penalty of $60 per form vs. $340 or more.

1. File within 30 days of the deadline

Submit your outstanding W2 forms to the Social Security Administration (SSA) as soon as you can (checking the information is accurate before sending). It is advisable at this point that you use the SSA Business Service Online portal for speedy submission and confirmation of receipt. You will still pay a late submission penalty of $60 per form, unless you applied for and have been granted an extension.

2. File by August 1

If you can’t make the first 30-day deadline for some reason, your next urgent objective should be to make an accurate filing by August 1 at the latest. If you have not issued employee W2 forms between January 31 and the end of the tax season, you should give that priority. Penalties will now be $130 per form, with a maximum amount of $1,993,500 and $664,500 for small businesses. The amount increases substantially to match the delay period.

The next step will be much heavier penalties and a possible audit to determine the reasons for non-compliance. This stage should be avoided if at all possible because it leads to employers being in a lot of hot water.

3. Correct mistakes on W2 submissions If the problem is about incorrect or omitted information, the easiest route is to submit the correct form within 30 days of the deadline (sooner if possible).

4. Prevent repeat exposure At the same time as fixing the current problem, put these simple steps in place to avoid paying penalties altogether.

• Conduct a pre-year-end payroll reconciliation, ensuring all information is accurate. Always double-check W2s before submission. This step alone can spare you a financial loss.
• Verify all employee and independent contractor TINs before year-end.
• Assign the filing of W2s and other information returns to one person. Hold this person responsible for filing by set deadlines.
• Use payroll software that helps you to prepare W2 in an SSA-accepted format.

Conclusion

The penalties for non- or late submission of W2 forms to the SSA attract substantial punitive penalties for employers. The longer you take to correct the matter, the higher the penalties you will need to pay.

The main objective is to rectify the matter as soon as you can and respond quickly to any IRS correspondence that is triggered by non-compliance.

For employers that have unique employment situations, such as global remote workers (including US citizens) and independent contractors, a solution exists in the form of an Employer of Record or Contractor of Record, who will ensure that all regulatory compliance is adhered to. This will take the responsibility for W2 submissions or 1099-NEC submissions completely away from your business.

FAQs: Penalty for employer not sending W2

1. Can an employer get in trouble for not sending W2?

Yes, an employer can get into trouble for not sending by the set deadline. Penalties are incurred once the deadline passes on a tiered basis. The longer the forms are outstanding, the larger the penalty amount. In the case of wilful or negligent non-compliance (defined as the conscious and deliberate refusal to comply with a request), more serious consequences can be taken.

2. What happens when an employer doesn’t send a W2?

An employer is required by statutory obligation to furnish an employee with a W2 by January 31 (or nearest set date). An employee should contact the employer once this date passes about the form, and if no response is received, can contact the IRS at 800-829-1040 after February 15th. If no form has been received by the tax deadline, use Form 4852 to submit information.

3. What forms should be submitted to the IRS for independent contractors?

The IRS requires employers to submit two different forms for compensation. One for employee wages, called a W2 form. The other is related to independent contractors, Form 1099-NEC (non-employee compensation). The 1099-NEC must be submitted by January 31, and reports payments of $600+ for the tax year. If an independent contractor failed to submit a w9 form, you will be required to do ‘backup withholding’ on payments, and then submit Form 945 to report this.