EMPLOYER'S GUIDE

To Filing Timely

And

Accurate W-2 Wage

Reports

**SOCIAL SECURITY ADMINISTRATION**

**Office of Income Security Programs**

**SSA Pub. No. 16-004**

**ICN 361752**

**December 2006**

YOUR RESPONSIBILITY 3

**HOW TO FILE 4**

**WHERE TO FILE 9**

**HOW TO AVOID ERRORS WITH NEW HIRES 11**

**HOW TO AVOID ERRORS ON FORMS W-2 AND W-3 15**

**FORM W-2 AND REMINDERS 20**

**FORM W-3 AND REMINDERS 22**

**MOST FREQUENT REPORTING ERRORS 23**

**WAGE REPORTING SOFTWARE 26**

**IF YOU MAKE A MISTAKE 27**

**EMPLOYER CORRECTION REQUEST LETTER 29**

**WHERE TO FIND HELP ON WAGE REPORTING QUESTIONS 30**

**OTHER EMPLOYER SERVICES PROVIDED BY SSA 32**

**THE SOCIAL SECURITY STATEMENT 33**

**EMPLOYER SERVICE LIAISON OFFICERS (ESLO) 34-37**

**APPENDIX 38**

-   **SPECIAL REPORTING SITUATIONS 39**

**SPECIAL WAGE PAYMENTS 39**

**THIRD-PARTY PAYERS OF SICK PAY 39**

**BACK PAY UNDER A STATUTE 40**

**TERMINATING A BUSINESS 40**

**REPORTING HOUSEHOLD EMPLOYEE WAGES 40**

**REPORTING A MINISTER'S INCOME 41**

**REPORTING TIPS 41**

**STATE AND LOCAL GOVERNMENT EMPLOYEES 42**

-   **HOW SSA PROCESSES WAGE REPORTS 43**

**SSA AND IRS RECONCILIATION PROCESSES 43**

-   **MONTHLY ER WAGE REPORTING RESPONSIBILITIES 44**

-   **END OF YEAR PREPARATION FOR WAGE REPORTING 45**

-   **SETTING UP FEDERAL TAX RECORDS FOR A BUSINESS 47**

-   **COMMENTS 48**

**YOUR RESPONSIBILITIES**

**Employers are required to:**

-   Report wages by filing Form W-2 (Wage and Tax Statement) for each
    employee from whom income, Social Security or Medicare taxes are
    withheld, or would have been withheld if exemption had not been
    claimed on Form W-4 (Employee's Withholding Allowance Certificate).

-   File a Form W-3 (Transmittal of Wage and Tax Statements).

-   File electronically if 250 or more W-2s are filed.

-   File accurate reports:

    -   **Make sure the name and Social Security number on each
        employee's Form W-2 is shown exactly the way it appears on the
        employee's Social Security card.**

    ```{=html}
    <!-- -->
    ```
    -   You can verify the name and Social Security number by contacting
        Social Security (see page 11 for more information).

**NOTE**: These W-2/W-3 reports are filed with the Social Security
Administration (SSA), not the Internal Revenue Service (IRS).

**HOW TO FILE**

This is an overview of each filing method available to meet your wage
reporting responsibilities.

## Electronic Filing

## Paper Forms W-2

> **NOTE:** You or your tax preparer may submit your wage reports by one
> of the methods described below. Tax preparation service providers can
> be located in the yellow pages of your telephone directory under
> headings such as: accountants, bookkeeping service, tax return
> preparation, or return preparation. Service providers are also
> identified on a vendor list maintained by SSA. This can be found at
> [www.socialsecurity.gov/employer/vendor.htm](http://www.socialsecurity.gov/employer/vendor.htm)
> , search under Vendor List. However, the use of a service provider to
> file wage reports with SSA does not exempt the employer from
> responsibility for the accuracy of the reports or for any penalties
> assessed by the Internal Revenue Service (IRS).

### 

###  [ELECTRONIC FILING]{.underline}

Electronic filing is considered the "best practice" when it comes to
submitting Form W-2 data to SSA. It's ideal for all submitters (i.e.
employers, certified public accountants, payroll service providers,
etc.) because:

-   It is **free, fast and secure.**

-   It saves time and **reduces filing burden.**

-   It offers a **later filing deadline** (the due date for
    electronically filed W-2s is March 31 versus February 28 for all
    other filing methods).

-   It provides an **electronic receipt for proof of filing.**

-   It is a **paperless** process.

-   You can track the status of your W-2 report as it's processed within
    SSA.

> Two electronic filing methods are available through **SSA's** Services
> for
>
> Businesses **online website at**
> [www.socialsecurity.gov/bso/bsowelcome.htm](http://www.socialsecurity.gov/bso/bsowelcome.htm)

1.  **Upload a Wage Report-** You can upload a wage report file
    formatted according to the specifications in SSA's MMREF-1
    publication, *Magnetic Media Reporting and Electronic* *Filing.*
    This is available on SSA's employer reporting instructions and
    information website at
    [www.socialsecurity.gov/employer/pub.htm](http://www.socialsecurity.gov/employer/pub.htm)
    . This filing method is ideal for any size filer.

2.  **W-2 Online**- You can complete up to 20 Forms W-2 right on your
    computer, submit them to SSA and print copies for your records and
    to give your employees. You will need Acrobat Reader 5.0, or a
    higher version of this software, to print employee copies. This
    option is ideal for businesses who submit 20 or fewer

W-2s or for individuals with household employees.

Registration is required for both options. Third-party preparers need
only register once in their own firm's name. A PIN will be issued
immediately. SSA will verify your registration information and mail you
a password within 10 to 14 days.

> **Have questions?** You will find the answers, including systems
> requirements, in the Business Services Online Handbook available on
> SSA's website at
> [www.socialsecurity.gov/employer](http://www.ssa.gov/employer)[/bsohbnew.htm]{.underline}
> or contact:
>
> BSO TECHNICAL ASSISTANCE
>
> Mon-Fri, 7:00 a.m. to 7:00 p.m. Eastern Time
>
> Voice: 1-800-772-6270 *Toll-free call*
>
> Fax: 1-410-597-0237 *Toll call*
>
> Email: [bso.support@ssa.gov]{.underline}
>
> **Electronic Data Transfer (EDT) -** SSA has a third electronic filing
> option **suitable for some State and Federal agencies**. It involves
> connecting directly with SSA via a dedicated telecommunications line.
> For more information about this filing option see our *Electronic Data
> Transfer (EDT) Procedural Guide* under "How to File" on SSA's employer
> website
> [www.socialsecurity.gov/employer/how.htm](http://www.socialsecurity.gov/employer/how.htm)
> .
>
> You may file wage reports (Forms W-2) electronically regardless of the
> number of employees. However, employers who file 250 or more Forms W-2
> or W-2Cs **MUST** file their reports electronically. This requirement
> may be waived by IRS for one year. Waiver requests should be filed
> with IRS on Form 8508 (Request for Waiver from Filing Information
> Returns on Magnetic Media).

If you file electronically, do not send paper copies of Form

> W-2 (Copy A) and Form W-3, or W-2C (Copy A) or Form W-3C to SSA.
> However, you must still provide paper copies of Forms W-2 and W-2C to
> your employees.

If you choose to have someone else prepare your electronic reports, you
may wish to consult a list of registered vendors, which is accessible on
SSA's website at
[www.socialsecurity.gov/employer/vendor.htm](http://www.socialsecurity.gov/employer/vendor.htm)
.

> **[PAPER W-2 FILING]{.underline}**
>
> Employers filing fewer than 250 Copy A forms can file either
> electronically or using paper Forms W-2 and W-3. This is what you need
> to prepare a paper wage report submission:

-   IRS's website at www.irs.gov allows you to download instructions for
    preparing Forms W-2 and Forms W-3. Printed instructions and Forms

> W-2/W-3, W2C/W3C can be obtained for free from the IRS by calling
> 1-800-829-FORM (1-800-829-3676).

-   **Laser Printed Forms-** SSA accepts laser printed Forms W-2/W-3 as
    well as the standard red drop-out ink accepted in prior years. Both
    the laser printed and the red drop-out ink forms must comply with
    IRS' Publication 1141, *General Rules and Specifications for Private
    Printing of Forms*

> *W-2/W3.*
>
> **VERY IMPORTANT:** Laser printed forms require approval from SSA.
>
> Approval is based on conformance with Publication 1141. If you use a
>
> software package to prepare your Forms W-2/W-3, make sure it is
> compliant
>
> with Publication 1141. If you are a software vendor desiring to have
> your
>
> forms approved, follow the instructions in Publication 1141. For a
> printed
>
> copy of the publication, call IRS at 1-800-829-3676 or print a copy
> from the
>
> IRS website.

-   If you use in-house software to produce your W-2 forms, you must
    follow the standards, specifications and edits in SSA's *Software*
    *Specifications and Edits for Annual Wage Reporting* publication No.
    31-011. It provides employers guidance on compiling payroll data
    used to produce Forms W-2/W-3 and furnishes programmers with
    requirements for properly producing the forms. You can obtain the
    booklet by calling 1-800-772-6270 or your local ESLO (see page
    34-37). It can be downloaded at our website
    [www.socialsecurity.gov/employer](http://www.socialsecurity.gov/employer)
    .

-   In-house software used to prepare Forms W-2c (Statement of Corrected
    Income and Tax Amounts) should follow the prescribed standards,
    specifications and edits in SSA's *Software Specifications and Edit
    Criteria for Correcting Annual Wage Reports* publication No.
    31-031*.*

-   Helpful information for preparing Forms W-2 for Puerto Rico-sited
    employers can be found in SSA's *Employer's Guide to Filing Timely
    and Accurate Form 499R-2/W-2PR Wage Reports on Puerto Rico Sited
    Employees* publication No. 16-011, in Spanish and English.

-   Employers with 20 or fewer employees, should consider W-2 online
    (see page 4).

> **WHERE TO FILE**

  -----------------------------------------------------------------------
  Select the appropriate mailing address depending on whether you are
  sending magnetic tape, cartridge, diskette or paper AND the carrier you
  choose (U.S. Postal Service or a private carrier such as FedEx or UPS).

  -----------------------------------------------------------------------

+-----------------------------------------------------------------------+
| ***Paper Forms W-2/W-3***\                                            |
| **Delivered by the U. S. Postal Service**\                            |
| Social Security Administration\                                       |
| Data Operations Center\                                               |
| Wilkes-Barre, PA 18769-0001\                                          |
| (for Certified Mail Use ZIP code 18769-0002)                          |
|                                                                       |
| ***Paper Forms W-2/W-3***\                                            |
| **Delivered by the Private Delivery Service (FedEx, UPS, etc.)**\     |
| Social Security Administration\                                       |
| Data Operations Center\                                               |
| Attn: W-2 Process\                                                    |
| 1150 E. Mountain Drive\                                               |
| Wilkes-Barre, PA 18702-7997                                           |
|                                                                       |
| ***Paper Correction Forms (USPS) W-2c/W-3c***\                        |
| Social Security Administration\                                       |
| Data Operations Center\                                               |
| P.O. Box 3333                                                         |
|                                                                       |
| Wilkes-Barre, PA 18767-3333                                           |
|                                                                       |
| ***Paper Correction Forms (Non-USPS & Certified) W2c/W3c***\          |
| Social Security Administration\                                       |
| Data Operations Center\                                               |
| Attn: W-2c Process\                                                   |
| 1150 E. Mountain Drive\                                               |
| Wilkes-Barre, PA 18702-7997                                           |
+-----------------------------------------------------------------------+

> **HOW TO AVOID ERRORS WITH NEW HIRES**

**[SOCIAL SECURITY NUMBERS (SSNs)]{.underline}**

The IRS requires taxpayers to provide the SSNs for the dependent
children listed on their tax returns, it should be infrequent that you
will have a new employee who does not have an SSN. However, if that
happens, or, if you have an employee whose name has changed, via
marriage, court order, etc., you should advise the employee to contact
any SSA office. For either an SSN or a card showing the new name, the
employee will need to complete an application and provide the necessary
evidence. If the employee has changed his or her name, the card showing
the new name will usually be received in about 2 weeks. If the employee
has never had a number and is now applying for one, there may be a delay
in processing the application. SSA verifies the birth records of people
born in the United States applying for SSNs and verifies the immigration
documents of all non-citizen applicants for SSNs and SSN cards. This
takes from two to eight weeks, depending on the individual situation. If
the new employee has applied for an SSN but not received the card before
you must file your W-2 reports:

-   Enter all zeros in the SSN block if filing electronically or on
    magnetic media and

-   Enter "Applied for" in box (d) on paper forms W-2

When the SSN is received, file Form W-2c with SSA showing the SSN
assigned.

Though not required as a condition of employment, each **new employee
hired** should show his or her Social Security card to you, if it is
available so that:

-   You can **check the SSN for accuracy.** Valid SSNs must have nine
    digits in this format: XXX-XX-XXXX. A listing of all SSN ranges
    issued to date is available on SSA's web page at
    www.socialsecurity.gov/employer/ssnu.htm

-   You can **accurately transcribe** the name and SSN to the employee's
    payroll records.

**If you report an employee's name and/or SSN that do not match SSA's
records:**

> **The employee's wages may not be credited to his or her Social
> Security record, which could result in potential loss of benefits**

**[VERIFYING SOCIAL SECURITY NUMBERS (SSNS)---SOCIAL SECURITY EMPLOYEE
VERIFICATION SERVICE (EVS)]{.underline}**

In many cases, name and SSN mismatches prevent wages from being posted
to individual earnings records. This can mean additional processing
costs for you. Using Social Security's verification service will help
you correct name and SSN errors before submitting your reports to SSA.
Using this service is easy.

**To verify 1 to 5 names/SSNs:** Call our toll-free number for
**employers,** 1-800-772-6270, Monday to Friday 7 a.m. to 7 p.m. Eastern
Time or SSA's general toll-free number, 1-800-772-1213, Monday-Friday 7
a.m. to 7 p.m. local time. Verification will be given over the
telephone.

**To verify up to 50 names/SSNs:** Up to 50 names/SSNs can be submitted
on paper lists and submitted to your local Social Security office. Some
offices accept faxed listings. To find the office nearest you, check
your local phone book or visit SSA's Internet Home Page at
www.socialsecurity.gov. You may call or visit the office.

**To verify over 50 names/SSNs:** A simple registration process is
required for a verification request of more than 50 names/SSNs
(regardless of how many items you want verified). Just complete a
registration form. To obtain more information or to register, call the
EVS hotline at 410-965-7140. At the prompt, leave your name and
telephone number and a verification specialist will return your call.
Publication 20-004, *Employee Verification Services*, which provides
detailed information and instructions, is available online at
www.socialsecurity.gov/employer/ssnu.htm.

**[INDIVIDUAL TAXPAYER IDENTIFICATION NUMBER (ITIN)]{.underline}**

An Individual Taxpayer Identification Number (ITIN) is a tax processing
number issued by the IRS to individuals who are resident or nonresident
aliens, who are NOT eligible for a Social Security Number because they
do NOT have work eligibility granted by the U.S. Bureau of Citizenship
and Immigration Services (BCIS). ITINs are also issued to their spouses
and dependents. ITINs are a nine digit number formatted like a SSN but
with the first digit of "9" in this format: 9NN-NN-NNNN.

ITINs are only used for Federal income tax purposes. The issuance of an
ITIN does not:

-   Entitle the recipient to Social Security benefits or the Earned
    Income Tax Credit (EITC);

-   Create an inference regarding the individuals' immigration status;
    or

-   Give the individual the right to work in the U.S.

## Therefore, employers should not use the ITIN (a nine digit number beginning with the number nine) for reporting earnings on the Form W-2. 

## 

## However, if you discover someone was hired in error and/or worked in error with an ITIN, you must still report the wages and request the employee provide a valid Social Security number. If the employee does not provide you with one before wages must be reported, you should complete the Social Security number field of the W-2 using all information, including the ITIN, as the employee stated on the W-4.

##  Exception: If the employee has applied for a Social Security number, but has not yet received it, print "Applied For" in the Social Security number block on W-2's. (Electronic W-2 filers should enter zeroes in the Social Security number field of the file.) Make sure you prepare and submit a W-2c later to change the zeroes to the correct number when the employee receives the Social Security number.

## 

## **VERIFYING EMPLOYMENT ELIGIBILITY**

Under the Immigration and Nationality Act, you must verify the identity
and employment eligibility of anyone you hire for employment in the
United States. This includes citizens and non-citizens. By making a good
faith effort to comply, you help to preserve jobs for those who are
legally entitled to them.

Form I-9 (The Employment Eligibility Verification Form), was developed
by the Bureau of Citizenship and Immigration Services, now part of the
Department of Homeland Security (DHS) for verifying that persons are
eligible to work in the United States. Completing this form is required
for every employee hired after November 6, 1986.

The employee completes and signs Section 1 of Form I-9 at the time of
hire. You must:

-   Examine the documents establishing the employee's identity and work
    eligibility (acceptable documents are described on the back of the
    Form I-9);

-   Determine if the documents reasonably appear to be genuine and
    relate to the person presenting them;

-   Record the information (as required in Section 2 of Form I-9) within
    3 business days of the date the employee began work. (If you are
    hiring the worker for less than 3 business days, Sections 1 and 2 of
    the Form I-9 must be completed at the time of hire.); and

-   Sign the Form I-9 and retain the completed form in your files.

The law prohibits discrimination on the basis of citizenship and
national origin. You must not discriminate against any person in hiring,
discharging, recruiting, referring for a fee, based on national origin,
or citizenship status.

In the event of an DHS, Department of Labor or Office of Special Counsel
inspection, you will generally be given three days notice.

A FREE on-line computer verification service is available to employers
in the states of California, Florida, Illinois, Nebraska, New York, and
Texas, and later this year to employers in all states. This service is
available to employers doing business in other States in addition to the
States above. This allows instant verification of name, SSN, and work
eligibility. Contact the BCIS' Business Liaison Office at 1-800-357-2099
for information.

BCIS's Publication M-274, *Handbook for Employers,* complete with Form
I-9 and answers to questions, is available to you at BCIS regional and
district offices, as well as local government printing office
bookstores. It is also available on BCIS's web site at

www.ins.gov.

If you have questions not addressed in the handbook, you should call
1-800-357-2099 or mail them to:

U.S. Bureau of Citizenship and Immigration Services

Office of Employer and Labor Relations

> 425 I St. N.W.
>
> Washington, D.C. 20536

## 

## **EMPLOYEE TAX WITHHOLDING**

New employees should complete Form W-4 (Employee's Withholding Allowance
Certificate) to establish the amount of Federal income tax to be
withheld from their wages. The employee can fill in the blocks on the
form but may NOT make any changes in the form's wording; changing the
forms wording makes the form invalid. This form also tells the employee
to call SSA (at 1-800-772-1213) if his/her name has changed since the
last Social Security card was issued and request a Form SS-5
(Application for a Social Security Card.) The application is also used
to apply for a corrected card. This is important because SSA will
compare the Form W-2 reports filed for your employees to SSA's record of
names and corresponding Social Security numbers.

**HOW TO AVOID ERRORS ON FORMS W-2 AND W-3**

**[GENERAL]{.underline}**

-   Carefully **review** the **new filing instructions** in IRS Pub. No.
    393, *Federal Employment Tax Forms,* issued each year by the IRS.

-   Advise employees to **notify SSA of any name change** to ensure
    wages are properly credited to their records. Do [NOT]{.underline}
    update your payroll records for a name change until the employee has
    obtained a new Social Security card. You can help employees by
    reminding them to promptly report a name change to Social Security
    by calling 1-800-772-1213 and requesting a Form SS-5, (Application
    for Social Security Card), which is also used for name changes. Tell
    employees that just notifying their payroll office will not change
    SSA's records and their wages may not be properly credited to their
    records.

-   Be careful preparing **Forms W-2** when your return includes reports
    **exempt from Social Security taxes.** If you prepare Forms W-2 for
    individuals who are exempt from Social Security taxes as well as
    individuals covered by Social Security, special care should be
    taken. It is important to ensure no Social Security wage or tax
    entry is made on Forms W-2 for exempt individuals. For a listing of
    the types of employees exempt from Social Security taxes, see
    "Special Rules for Various Types of Services and Payments" in IRS
    Pub. No. 15, *Employer's Tax Guide*, also known as *Circular E.*

-   Refer to material entitled "**Where to Find Help on Wage Reporting
    Questions"** on page 30.

**[PAPER FILERS]{.underline}**

-   Attend the Small Business Seminar in your area hosted by IRS and SSA
    to obtain the latest instructions for reporting wages and taxes.
    Call IRS (1-800-829-1040) or the Employer Service Liaison Officer
    (ESLO) (pg. 34-37) in your area for the date, place and time of the
    next seminar.

-   Employers should request SSA Pub. No. 31-011, *Software Standards
    and Edits for Annual Wage Reporting.* This publication covers
    software standards and edits criteria. To request this publication,
    call the Employer Service Liaison Officer (ESLO) serving your area
    (pg. 34-37), or write to:

> Social Security Administration
>
> Office of Financial Policy and Operations
>
> Attention: AWR Software Standards Project
>
> P.O. Box 17195
>
> Baltimore, MD 21235

-   Paper filers should refer to the Form W-3 and Form W-2
    **"**Reminder**"**

> pages provided later in this publication.

**[ELECTRONIC FILERS]{.underline}**

-   For time, date and place of the next yearly **Seminar** contact the
    Employer Service Liaison Officer (ESLO) serving your area (see pg.
    34-37) or see our website at
    [www.socialsecurity.gov/employer/sem.htm](http://www.ssa.gov/employer/sem.htm).
    Plan to attend the free seminar for the latest filing instructions.

-   Request the MMREF-1, *Magnetic Media Reporting and Electronic
    Filing* publication by downloading via your computer at
    [www.socialsecurity.gov/employer](http://www.ssa.gov/employer)/pub.htm
    or call the employer services number at 1-800-772-6270 Monday to
    Friday, 7 a.m. to 7 p.m. Eastern Time. SSA revises and issues this
    publication yearly. To avoid errors, magnetic media filers should
    **strictly follow these guidelines.**

**[BALANCING FORMS 941 TO FORM W-3 INFORMATION]{.underline}**

Before filing your wage reports with SSA, you should balance or
reconcile your Form 941 reports to your Form W-3 for the year. This will
help you identify and resolve errors in your records, which could lead
to the filing of erroneous reports. You should balance the cumulative
quarterly Forms 941 for the tax year to the Form W-2/W-3 information in
your records at the end of the tax year. Also, we prepared for your
assistance, the following two worksheets.

-   Use the first worksheet when preparing your summary income and wage
    reports for the year to be filed with SSA -- using Form W-3 for
    paper report filers or RT Record for magnetic media filers.

-   Use the second worksheet in preparing your fourth quarter Form 941,
    due to the IRS at the end of January of the next year or, if all
    required deposits were timely, due 10 working days from the end of
    January.

-   At this time, review your copies of previously filed Forms 941 for
    the year (the first three calendar quarters) along with the payroll
    records for the year. Identify any over or under reporting of income
    or wages and, adjust any overpayment or underpayment of taxes on the
    Form 941 for the erroneous quarter. For example, a 2001 reporting
    error discovered during January, 2002 would be an adjustment on the
    first quarter 2002 Form 941. Remember a 941c is not a stand-alone
    form; it must be filed with the next quarter's 941.

> **WORKSHEET FOR FORM W-3**
>
> In order to comply with the provision of the Americans with
> Disabilities Act (ADA), Section 508, we are unable to have the
> worksheets appear on this website. If you require the worksheets, you
> can request a paper copy of the "Employer's Guide" from SSA. You can
> fax your request to SSA at 410-965-2037, attention: Helen Davis and
> ask for Pub. No. 16-004, ICN 361752 or you can write to SSA at 6301
> Security Blvd., Supply Building, Baltimore, MD 21235, and Attention:
> Helen Davis.
>
> Annual amounts from payroll records should match the total amounts
> reported on all Forms 941 for the year; the total amounts reported on
> all Forms 941 for the year should match the sum of the same data
> fields which is shown in the W-3 totals. If these amounts do not
> match, recheck records and identify necessary adjustments. (Note:
> Errors identified on prior Form 941 returns for total wages, tips and
> other compensation cannot be adjusted and need not match the Form
>
> W-3.
>
> Make necessary adjustments to balance totals and account for:

-   Correcting fourth quarter Form 941 after filing.

-   End-of-year bonuses, awards, etc., not included in the previous Form
    941.

-   Adjusted amounts for a prior year reported on current year Forms 941
    and in error included in current year totals.

-   Taxable fringe benefits for November and December that will be
    treated as received in the following year but were shown as current
    year payments in error.

-   Amounts reported on previous Forms 941 as wages which are, in fact,
    payments to an independent contractor.

**WORKSHEET FOR FOURTH QUARTER FORM 941**

> In order to comply with the provision of the Americans with
> Disabilities Act (ADA), Section 508, we are unable to have the
> worksheets appear on this website. If you require the worksheets, you
> can request a copy of the "Employer Guide" from SSA. You can fax your
> request to SSA at 410-965-2037, attention: Helen Davis and ask for
> Pub. No. 16-004, ICN 361752 or you can write to SSA at 6301 Security
> Blvd., Supply Building, Baltimore, MD 21235, and Attention: Helen
> Davis.
>
> **EXAMPLES OF ADJUSTMENTS**

-   **Total wages, tips, other compensation**

> ***Exclude:*** Deferred compensation, 401(k) plans, nontaxable fringe
> benefits, payments of deceased worker's pay to beneficiaries

-   **Social Security wages and Medicare wages**

> ***Include:*** Deferred compensation, costs of group term life
> insurance for employee over \$50,000, payments of deceased worker's
> pay to beneficiaries in current year, and taxable employer funded,
> sick pay/disability pay for up to the 6 month periods of coverage and
> taxable payments (See IRS Publication 15-A)
>
> ***Exclude:*** Wages over yearly maximum amount for employee, payments
> to deceased worker's beneficiaries after year of death, wages of child
> under 18 from parent

-   **Social Security tips/Medicare tips**

> ***Exclude:*** Tips less than \$20 per month for the employee, amounts
> which together with wages exceed the yearly maximum amounts for the
> employee
>
> **REMINDERS FOR FORMS W-2**

-   **Box b --** Show the 9-digit employer's identification number (EIN)
    as shown on Form 941 in this format: XX-XXXXXXX.

-   **Box d-** Show the 9-digit employee's Social Security number as
    shown on the employee's Social Security card and withholding Form
    W-4 in this format: XXX-XX-XXXX.

-   **Box e --** Show the employee's name as shown on his or her Social
    Security card.

-   **Box 1 --** Include: regular wages, tips, and other compensation
    including: taxable fringe and other non-cash benefits, bonuses,
    commissions, taxable sick/disability pay;

**Exclude:** Deferred compensation

-   **Box 3 --** Do not show wages beyond the Social Security maximum
    for the year. Do not include Social Security tips and allocated
    tips. Show decimal point and cents (.05, .00, etc.)

-   **Box 5 --** There is no Medicare wage maximum. Box 5 **must never
    be** less than the sum of boxes 3 and 7.

-   **Box 7 --** Include only tips paid. Do [not]{.underline} include
    tips under \$20 per month and "allocated" tip amounts.

-   **Box 11 --** Show in this box distributions from non-qualified
    deferred compensation plans. Also show any amounts that are reported
    in box 3 and 5 because substantial risk of forfeiture has lapsed.
    For some employees, amounts may actually be shown in this box twice
    -- once when the Social Security tax is due and again when the money
    is distributed. (SSA uses the information in this box to make sure
    that beneficiaries were paid the right amount of benefits during the
    year.)

-   **Other Reminders**

    -   Keep entries inside boxes;

    -   Use only dark ink; 12 pt. Courier font;

    -   No erasures, white-out, etc.; and

    -   No dollar signs

**REMINDERS FOR FORMS W-3**

-   **Box b --** Always complete this box.

-   **Box c --** Show the number of Forms W-2 accompanying the Form W-3
    to help identify any missing Forms W-2. Do not include voided or
    blank W-2 Forms.

-   **Boxes e, f, and g --** Position the gummed employer identifying
    label provided at the end of the year by IRS in Pub. No. 393 within
    the heavy lines. If the label is missing or unusable, enter the EIN
    in Box e, the employer's name in Box f, and the employer's address
    in Box g.

-   **Box h --** It is important to show any other EIN used during the
    tax year in this box to ensure proper matching of IRS and SSA
    records. Show the EIN in this format: XX-XXXXXXX.

**MOST FREQUENT REPORTING ERRORS**

## **GENERAL**

***Incorrect or Missing Employer Identification Number (EIN)***

SSA and IRS maintain employer records by EIN. Reports received with
erroneous EINs may be credited to the wrong record. To avoid these
errors, be sure:

-   Your reported EIN has nine digits displayed in this format:
    XX-XXXXXXX.

-   The EIN on your Form W-3 is the same as the EIN reported on your
    Form 941.

***Incorrect Employee Names and Social Security Numbers (SSNs)***

In order to credit earnings to an employee record, the employee name and
SSN must match the name and SSN in SSA's files. (See page 11 for ways
you can ensure that accurate SSNs are recorded.)

###### Wage Reports for the Year after an Employee's Death

For SSA purposes, payments made after the year an employee dies on
behalf of that deceased employee cannot be credited as wages. Report
such payments for the beneficiary or estate of the deceased employee on
Form 1099-MISC (Miscellaneous Income) in box 3, "Other Income."

###### Use of Titles and Abbreviations in Name Fields

The name fields of wage reports should not include any titles (Mr.,
Mrs., Dr., etc.), designation suffixes such as Jr., Sr., Rn., Esq. or
abbreviations to designate the employee's position, title,
company/division, etc. Titles in the employee name fields could prevent
SSA from electronically identifying the employee for whom the wages are
reported.

###### Errors Resulting in Out-of-Balance Reports

-   Using the maximum Social Security wage amount for a prior year
    instead of the amount for tax year reported.

-   Limiting the taxation of Medicare wages by the maximum Social
    Security wage amount. All Medicare wages are taxable.

-   Decimal mistakes in money fields (e.g., "4800" may be credited as
    "48.00" instead of "4800.00"). Always show both dollars and cents,
    even if cents are ".00."

-   Tips included in the Social Security wage field as well as in the
    Social Security tip field. (These fields are added together by SSA
    to determine the total Social Security earnings.)

-   Omitted wage or tax fields on wage reports.

> **[PAPER FORM W-2 REPORTS]{.underline}**

####### Failure to File Forms with SSA --See "Where to File" page 9

> W-2 Forms should be filed with the Social Security Administration, NOT
> the IRS. Do NOT file W-2s with the IRS; send them to SSA.
>
> Paper Forms W-2 (Copy A) and W-3 are processed by SSA on optical
> scanning and imaging equipment. Complete these forms using black
> (non-script) type font with 12 characters per inch. If the forms do
> not meet specifications, incorrect and costly processing will occur.

####### Prior Tax Year Form W-2 Used

SSA optical scanning and imaging systems are modified annually to meet
year-to-year changes in Form W-2 formats. Use only the Form W-2 for the
proper tax year.

####### Failure to Use Forms That Meet IRS Specifications

If IRS forms are not used, the submitter must use forms printed in OCR
red drop-out ink on paper of the proper weight, margins and format.
Failure to file properly can subject the filer to IRS penalties. IRS
Pub. No. 1141, *Specifications for Private* *Printing of Substitute
Forms W-2 and W-3*, provides specifications and rules for private
printing of substitute Forms W-2 and W-3. Additionally, employers may
submit laser-printed forms which meet the requirements specified in IRS
Pub. No. 1141 and which have been approved by SSA.

####### Void Indicator on Form W-2 Checked in Error

SSA will not credit wages shown on any Form W-2 that is void. In
addition to checking the "void" box, it is helpful to "X" the entire
voided Form W-2.

####### Failure to Complete the "Retirement Plan" Block of Form W-2

On Form W-2, the Retirement Plan block of Box 13 must be checked when
the worker is an active participant in a retirement plan or a simplified
employee pension plan the employer maintains. Failure to make an entry
when required can lead to income tax problems with IRS for the worker.
See IRS Pub. No. 1602, *General Rules* *for Individual Retirement
Arrangements Under the Tax Reform Act of 1986*, for information on this
subject.

####### Incorrect or Omitted Medicare Wages/Tips

Report Medicare wages/tips separately from any Social Security wages and
tips. There is no limit to the wages/tips subject to Medicare tax, so
all such earnings must be shown on Forms W-2 and W-3 wage reports.

**[FORM 941 AND 943 REPORTS]{.underline}**

***Incorrect or Omitted Medicare Wage/Tip Amounts***

Show Medicare wages/tips separately from Social Security wages and tips
on Forms 941 filed with IRS.

***Incorrect or Omitted Third Party Sick Pay***

See the discussion on third party sick pay on page 39.

***Showing Non-Covered Amounts as Social Security/Medicare Wages***

Examples of non-covered amounts are:

-   Employee earnings exceeding the yearly taxable amount for Social
    Security wages.

-   Payments to an independent contractor shown as wages.

See IRS Pub. No. 15, *Employer's Tax Guide*, for other non-covered wages
under the heading "Special Rules for Various Types of Services and
Payments."

***Failure to File Forms W-3c and W-2c With SSA When Adjusting Prior
Year Earnings on Form 941 or Form 943***

Adjustments of tax liability filed with IRS which are based upon changes
in Social Security /Medicare wages should be matched by the filing of
wage adjustment Form W-3c (Transmittal of Corrected Wage and Tax
Statements) and Form W-2c with SSA to enter wage changes on the
employee's records. See page 27 for more information about correcting
reporting errors.

***Filing of Duplicate or Partially Duplicate Forms 941***

Social Security/Medicare wages shown on duplicate or partially duplicate
Forms 941 (e.g., one month's wages are reported on two different
quarterly reports), may lead to unnecessary and costly reconciliation
activity between SSA, IRS and the employer.

> **WAGE REPORTING SOFTWARE**

#### AccuWage & AccuW2c for Tax Year 200x

##### Test Software for Users of the MMREF Format

######## What is AccuWage/AccuW2c?

AccuWage/AccuW2c is free software from SSA for use with two
publications: MMREF-1, *Magnetic Media Reporting* *and Electronic
Filing* and MMREF-2, *Magnetic Media Reporting and Electronic Filing of
W-2c Information.* It allows you to enter a limit on the number of
errors that AccuWage can find before it stops testing.

**How does AccuWage/AccuW2c work?**

First, you'll need to download and install the AccuWage/AccuW2c software
on your PC. Then, tell AccuWage/AccuW2c in which directory your W2 file
is located. AccuWage/AccuW2c will read the file and inform you of any
format errors it was able to detect. That's how easy it is to use!

######## What format is needed to use AccuWage/AccuW2c?

AccuWage/AccuW2c works with electronic W-2 files. If your software
creates W2 file in the *Magnetic Media Reporting and Electronic Filing*
(MMREF-1 format), then you should use AccuWage. For *Magnetic Media
Reporting and Electronic Filing of W-2c Information* (MMREF-2 format),
use AccuW2c.

***AccuWage/AccuW2C does [not]{.underline} work with formats other than
MMREF as the MMREF is now the required format for all W-2/W-3 wage
reports.***

######## How do you download AccuWage/AccuW2c software?

Go to AccuWage information and software on SSA's employer website at
[www.socialsecurity.gov/employer/accuwage](http://www.socialsecurity.gov/employer/accuwage)
.

**IF YOU MAKE A MISTAKE**

> ***[REPORTING FORM W-2 CORRECTIONS]{.underline}***

**[CORRECTIONS BEFORE FILING W-2s WITH SSA]{.underline}**

After providing an employee with his or her copies of the Form W-2, you
may become aware of the need to make corrections prior to filing Form
W-2 with SSA.

-   **If the** **only correction needed is for State or local
    government** **information**, your State or local government
    regulations may require that you file correction returns with them.
    However, no change in form W-2 data is needed for SSA. Give the
    employee corrected Form W-2 copies with "Reissued Statement" shown
    at the top.

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-   **If** **other corrections** **are needed**, correct the Form W-2
    data before filing with SSA. Give the employee a revised Form W-2.

**[CORRECTIONS AFTER FILING W-2s WITH SSA]{.underline}**

Once Form W-2 information is filed with SSA, make any necessary
corrections on prescribed Forms W-2c and W-3c. **You may** **obtain
these forms from IRS by calling 1-800-829-3676.** The IRS website at
www.irs.gov contains instructions for Forms W-2c and W-3c.

Furnish a copy of the Form W-2c to the employee. If you need information
about filing Form W-2c reports on paper or electronically, contact SSA's
Employer Reporting Branch at 1-800-772-6270 or the Employer Service
Liaison Officer for your State (pgs. 34-37). If the employee changes his
or her name, the employee should notify SSA and request a name change on
his or her Social Security card.

Here are a few hints to remember when preparing correction forms:

-   File Forms W-2c and W-3c as soon as possible after you discover an
    error. Also provide a copy of the Form W-2c to employees as soon as
    possible.

-   The electronic reporting threshold (250 or more Forms W-2) does
    apply to Form W-2c reporting.

Forms W-2c submitted electronically should follow the reporting
specifications found in the MMREF-2, *Magnetic Media Reporting and
Electronic Filing* *of W-2c Information*. Employers submitting Form W-2c
Copy A information electronically must provide their employees with the
required paper copies of Form W-2c information.

-   If any item shows a dollar change and one of the amounts is zero,
    enter \"0\". Do not leave the box blank.

-   Make sure your Employer Identification Number (EIN) reported on
    Forms W-2c and W-3c and, if applicable, Form 941c (Supporting
    Statement to Correct Information) is the same number issued by the
    IRS and used on all three types of forms.

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-   Corrections to amounts reported in a prior tax year should be shown
    on a Form 941c for the period when the error was discovered.
    Remember to file the Form 941c with your next Form 941 (Employer\'s
    Quarterly Federal Tax Return) as it cannot be filed alone.

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-   If you use your own software to prepare and submit paper Forms W-2c,
    follow the instructions in SSA\'s *Software Specifications and Edits
    for Correcting Annual Wage* *Reports*, Pub.No.31-031 Portable
    Document Format:  (You must have Adobe Acrobat reader software to
    view this file.)

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```
-   Special rules apply to Medicare Qualified Government Employment
    (MQGE) employees. See the IRS Form W-2c/W-3c Instructions for
    details.

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```
-   See the "**Where to File**" information on page 9 for the Forms
    W-2c/W-3c mailing addresses.

***[REPORTING FORM 941 CORRECTIONS]{.underline}***

To correct amounts reported to IRS on Form 941 (Employer's Quarterly
Federal Tax Return) submit the following:

-   Form 941 for current quarter reporting and show the adjusted
    amount(s) for the quarter you are correcting; and

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-   Form 941c (Supporting Statement to Correct Information). Remember,
    do not file the 941c by itself; send it with the next 941 you file.

**CORRECTION REQUEST LETTER**

SSA sends a letter to every employer who reports SSNs and/or employee
names on Forms W-2 that does not match SSA records. Employers receive
this letter if they reported more than 10 "no-match" SSNs and names and
these represent more than 0.5% of the forms W-2 in the employer's
report. The letter lists up to 500 specific SSNs for employees that do
not match SSA records. If you have more than 500 errors or if you have
additional questions, you may call the Employer Reporting Branch at
1-800-772-6270.

The purpose of the letter is to obtain corrected information to help SSA
identify the individual to whom the earnings belong and to post those
earnings to his/her earnings record. These earnings may be used later to
determine if the individual can receive Social Security benefits and the
amount of any payment. Also, the IRS uses the information for tax
purposes. You are asked to prepare Forms W-2c for each of the SSNs
listed in the notice that you are able to correct.

There are a number of reasons why a name and/or SSN might not match
SSA\'s records. For example, name changes such as a married woman who
did not change her name with SSA, transcription or typographical errors,
blank name or SSN.

It is important to note that, as stated directly in the letter, it does
not imply that you or the employee intentionally provided incorrect
information. These letters do not make any statement about an employee's
immigration status and are not a basis, in and of themselves, for taking
any adverse action against an employee.

We also send a letter to each employee whose name and/or SSN shown on
his W-2 and/ or W-2c failed to match SSA\'s records. This letter asks
the employee to check the reported information and provide SSA and
his/her employer with corrected information. The employee may need to
call SSA at 1-800-772-1213 or visit a Social Security office to resolve
any discrepancies. If SSA's records show a non-existent, unknown, or
invalid address for your employee, SSA will, instead, send you a letter
concerning that individual employee.

Both the employer and employee letters cite employment law principles in
English and Spanish and provide instructions on how to receive a Spanish
translation of the entire letter, or additional help, if needed.

**WHERE TO FIND HELP ON WAGE REPORTING QUESTIONS**

If you have questions about annual wage reporting, please refer to one
of the publications or sources listed below. In addition, employers and
tax preparers can access SSA and IRS websites. These sites contain
information helpful to wage report filers, and will answer questions
submitted via e-mail.

######## 

**[HELPFUL SSA PUBLICATIONS]{.underline}**

-   *Magnetic Media Reporting and Electronic Filing,* MMREF-1, contains
    specifications and edits for preparing wage reports electronically.

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-   *Software Standards and Edit Criteria for Annual Wage Reporting,*
    Pub. No. 31-011, sets out standards and edits for software that
    produces paper W-2 wage reports.

```{=html}
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```
-   *Software Specifications and Edit Criteria for Correcting Annual
    Wage Reporting,* Pub. No. 31-031, sets out standards and edits for
    software that produces paper Forms W-2c and W-3c.

```{=html}
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```
-   *Employee Verification Service,* Pub. No. 20-004, provides
    instructions for verifying employee names and Social Security
    numbers.

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```
-   *Magnetic Media Reporting and Electronic Filing of W-2c
    Information,* MMREF-2, contains instructions for preparing W-2c
    corrections.

**To request SSA publications, you can**:

-   **Telephone,** toll-free, the employer services number at
    1-800-772-6270, Monday to Friday, 7 a.m. to 7 p.m. EST, or

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```
-   **Download** via your computer at www.socialsecurity.gov/employer.

**[PERSON--TO-PERSON HELP FROM SSA]{.underline}:**

If you need to talk directly to SSA staff about a wage report processing
problem, you may contact SSA's employer services at 1-800-772-6270 or an
Employer Service Liaison Officer (ESLO) (wage reporting specialists in
the SSA regional office in your area.) A list of their telephone numbers
is provided on pages 34-37.

For other Social Security information, call SSA's toll-free number,
1-800-772-1213,

Monday to Friday, 7 a.m. to 7 p.m., local time.

######## 

######## [HELPFUL IRS PUBLICATIONS]{.underline}

-   *Employer's Tax Guide,* Pub. No. 15, (Circular E), explains employer
    requirements for withholding, depositing, reporting and paying
    employment taxes.

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-   *Employer's Supplemental Tax Guide,* Pub. No. 15-A, has information
    about reporting sick pay, religious exemptions, special rules for
    paying taxes and other specialized employment tax information.

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```
-   *Employer's Tax Guide to Fringe Benefits,* Pub. No. 15-B.

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```
-   *Agricultural Employer's Tax Guide,* Pub. No. 51 (Circular A)

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```
-   *Tax Guide for Small Business,* Pub. No. 334, contains an overview
    of how tax laws apply to sole proprietors.

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```
-   *Partnerships,* Pub. No. 541

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```
-   *Corporations,* Pub. No. 542

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```
-   *Federal Employment Tax Forms,* Pub. No. 393, provides instructions
    for preparing annual wage reporting Forms W-2 and Form W-3.

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```
-   *Specifications for Private Printing of Substitute Forms W-2 and
    W-3,* Pub. No. 1141, explains requirements for privately printed
    Forms W-2 and W-3 that are used in lieu of IRS-provided forms.

```{=html}
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```
-   *Instructions for Forms W-2 and W-3,* provides guidance for
    completing Form W-2 and Form W-3 item-by-item.

```{=html}
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```
-   *Starting a Business and Keeping Records,* Pub. No. 583

```{=html}
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```
-   *Reporting Backpay and Special Wage Payments to the Social Security
    Administration,* Pub. No. 957

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```
-   *Federal-State Reference Guide,* Pub. No. 963, provides guidelines
    for Social Security and Medicare coverage and tax withholding
    requirements for State, local and Indian Tribal government employees
    and public employees.

***To request IRS publications, you can:***

-   ***Telephone,*** toll-free, 1-800-829-3676, or

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-   ***Download*** via your computer at www.irs.gov.

######## [PERSON-TO-PERSON HELP FROM IRS:]{.underline}

If you need to talk directly to **IRS staff,** call: **1-866-455-7438**
(or contact an IRS district office in your area) for specific employment
tax problem(s). If you have contacted that office before about this
problem and it has not been satisfactorily resolved, you may ask to
speak to the Problem Resolution Officer in the district office. In
addition, use this number for questions about Forms 941, 943 or Schedule
H.

Call:

-   1-304-263-8700 for questions about completing Forms W-2 and W-3.

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-   1-866-455-7438 (toll free) for the IRS Employer Reporting Center.

######### OTHER HELPFUL INFORMATION SOURCES

-   The **Small Business Administration (SBA)** has a variety of
    publications and technical assistance resources available for
    employers. For more information about their services, contact SBA at
    1-800-827-5722 or, via the Internet at:
    http://www.sbaonline.sba.gov.

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```
-   The **U.S. Business Advisor** provides businesses with federal
    government information, services and transactions. Their Internet
    address is: http://www.business.gov.

**OTHER EMPLOYER SERVICES PROVIDED BY SSA**

**[FORM SS-4 (APPLICATION FOR EMPLOYER IDENTIFICATION
NUMBER)]{.underline}**

Local SSA offices maintain supplies of Form SS-4 for the convenience of
employers. IRS requires each new business to file this form in order to
obtain a unique employer identification number (EIN). Once completed,
the Form SS-4 is filed with IRS and an EIN is assigned. The EIN is used
to identify the employer's tax returns, tax payments and wage reports.

######## [INFORMATIONAL PAMPHLETS]{.underline}

SSA local offices stock a variety of general informational pamphlets
that explain the annual wage reporting process and the Social Security
benefit programs. Among these are:

**For** **employers**:

-   *An Employer's Investment in Social Security*, Pub. No. 05-10059

**For** **employees**:

-   *How You Earn Social Security Credits*, Pub. No. 05-10072

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```
-   *Your Social Security Earnings Record*, Pub. No. 05-10044

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-   *Your Social Security Taxes*, Pub. No. 05-10010

You can obtain these by contacting your local SSA office, calling SSA's
toll-free number, 1-800-772-1213, or via the Internet at
www.socialsecurity.gov.

**[SPEAKER'S BUREAUS]{.underline}**

SSA provides speakers for wage reporting seminars, as well as for
pre-retirement sessions for employer-sponsored onsite meetings with
employees. For more information, contact your local SSA office or call,
1-800-772-1213.

**[EARNINGS INFORMATION FOR PRIVATE PENSION PLAN BENEFITS]{.underline}**

Many private pension plans require that Social Security earnings be
taken into account when computing their pension or, the SSA benefit
amount may offset the amount paid under their plan. For a fee (and with
the individual's consent), SSA may disclose the earnings recorded in its
files to a pension plan. For more information about this service, write
to:

Social Security Administration

Office of Earnings, Enumeration and Administration (OEEAS)

Division of Earnings Correction and Use

3-D-18 Operations Bldg.

6401 Security Blvd.

Baltimore, MD 21235

**THE SOCIAL SECURITY STATEMENT**

The *Social Security Statement* is a concise, easy-to-read personal
record of the earnings on which employees have paid Social Security
taxes during their working years and a summary of the estimated benefits
they and their families may receive as a result of those earnings.

SSA provides the statements in two ways: First, in automatic annual
mailings to workers and former workers aged 25 and older, not receiving
benefits; and second, at any time to workers of any age who request them
from SSA.

Employees should keep their statement with other important papers and
use it in several ways:

-   First, the benefit estimates in the statement can play an important
    role in financial planning. When combined with savings, investments
    and other pensions, Social Security benefits can help build a secure
    future for one's self and family.

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-   Second, the statement can help make sure that reported earnings and
    other important information such as name and date of birth are
    correct on the record. Mistakes could keep one from getting all the
    Social Security benefits they have earned. The sooner mistakes are
    identified, and SSA notified, the easier it will be to help SSA
    correct them.

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-   And finally, the general information on the statement tells about
    all the protection one earns under Social Security. Many people
    think of Social Security only as a retirement program. The statement
    shows how even young workers are building valuable protection in
    case they become disabled or die before they reach retirement age.

> **EMPLOYER SERVICE LIAISON OFFICERS (ESLO)**

**ATLANTA:**

**Patricia McCarron**

Social Security Administration

61 Forsyth St. Suite 22T64

Atlanta, Ga. 30323

\(404\) 562-1314 (for Ers)

\(404\) 562-1315 (for SSA)

FAX (404) 562-1313

E-mail: <Pat.McCarron@ssa.gov>

Alabama

Florida

Georgia

Mississippi

North Carolina

South Carolina

Tennessee

**BOSTON**:

**Regina Bachini**

Social Security Administration

J.F. Kennedy Bldg., Rm. 1925

Cambridge Street

Boston, MA 02203

\(617\) 565-2895

FAX (617) 565-4814

E-mail: <Regina.Bachini@ssa.gov>

Maine

Massachusetts

New Hampshire

Rhode Island

Vermont

**CHICAGO:**

**Paul Dieterle**

Social Security Administration

600 West Madison, 10^th^ Fl.

Chicago, IL 60661

\(312\) 575-4243

FAX (312) 575-4245

E-mail: <Paul.Dieterle@ssa.gov>

Illinois

Indiana

Michigan

Minnesota

Ohio

Wisconsin

**DALLAS:**

**Debbie Forsythe**

Social Security Administration

Federal Office Bldg., Rm. 1244

1961 Stout St.

Denver, CO 80294-3538

\(303\) 844-2364

FAX (303) 844-3281

E-mail: <Debbie.Forsythe@ssa.gov>

Arkansas

Louisiana

New Mexico

Oklahoma

Texas

**DENVER:**

**Carolyn Sykes**

Social Security Administration

Federal Office Bldg., Rm. 1244

1961 Stout St.

Denver, CO 80294-3538

\(303\) 844-2364

FAX (303) 844-3281

E-mail: Carolyn.Sykes@ssa.gov

Colorado

Montana

North Dakota

South Dakota

Utah

Wyoming

**KANSAS CITY:**

**John Gezich**

Social Security Administration

POC Federal Office Bldg., Rm 436

601 E. 12^th^ St.

Kansas City, MO 64106

\(816\) 936-5649

FAX (816) 936-5951

E-mail: <John.Gezich@ssa.gov>

Iowa

Kansas

Missouri

Nebraska

**NEW YORK:**

**Tyrone S. Benefield**

Social Security Administration

26 Federal Plaza, Rm. 4060

New York, NY 10278

\(212\) 264-1117

FAX (212) 264-2071

E-mail: [Tyrone.S.Benefield@ssa.gov](mailto:Tyrone.Benefield@ssa.gov)

New Jersey

New York

Puerto Rico

Virgin Island

**PHILADELPHIA:**

**Frank O'Brien**

Social Security Administration

P.O. Box 8788

Philadelphia, PA 19101

\(215\) 597-4632

FAX (215) 597-2989

E-mail: Frank.OBrien@ssa.gov

Delaware

District of Columbia

Maryland

Pennsylvania

Virginia

West Virginia

**SAN FRANCISCO:**

**Bill Brees**

Social Security Administration

P.O. Box 4206

CP R6

Richmond, CA 94804

\(510\) 970-8247 (Ers)

\(510\) 970-8249 (SSA)

FAX (510) 970-8101

E-mail: <Bill.Brees@ssa.gov>

American Samoa

Arizona

California

Guam

Hawaii

Nevada

Northern Mariana Islands

**SEATTLE:**

**Tim Beard**

Social Security Administration

Suite 2900 M/S 303A

701 Fifth Ave.

Seattle, WA 98104-7075

\(206\) 615-2125

FAX (206) 615-2643

E-mail: <Tim.Beard@ssa.gov>

Alaska

Idaho

Oregon

Washington

> **APPENDIX**

#### SPECIAL REPORTING SITUATIONS

## **SPECIAL WAGE PAYMENTS**

A special wage payment is an amount paid to an employee (or former
employee) that was earned for services performed in a prior year. If the
recipient is retired (or continues to work) and receives Social Security
retirement benefits, a special wage payment may cause the benefits to be
erroneously reduced if the payment is not reported to Social Security as
a special wage payment. If not reported, the special wage payment will
be considered as current year earnings and counted against the statutory
earnings limit. The earnings limit sets the amount that a Social
Security recipient can earn each year without a reduction in retirement
benefits. When the earnings limit is reached, benefit payments are
reduced.

The following examples of payment, if paid to a Social Security
retirement beneficiary, may be special wage payments if the payment is
for services performed in a prior year.

-   Accumulated sick and vacation pay;

-   Back pay;

-   Bonuses;

-   Deferred compensation;

-   Payments because of retirement;

-   Sales commissions;

-   Severance pay;

-   Stock options; and

-   Payments from nonqualified deferred compensation plans.

To avoid an erroneous reduction in the recipient's retirement benefits,
report special wage payments to the Social Security Administration by
April 1st. Employers may choose one of several methods.

-   Form SSA-131;

-   Paper listings; and

-   For nonqualified deferred compensation plans only, Form W-2.

For detailed reporting instructions see IRS Publication 957 *Reporting
Back Pay and Special Wage Payment to the Social Security
Administration*, which is available free from the Internal Revenue
Service. Call 1-800-829-3676. You may obtain Form SSA-131 from any
Social Security office or from the SSA web page.

## **THIRD PARTY PAYERS OF SICK PAY**

You may arrange to have sick pay for your employees paid by a third
party. With a third party, the responsibility of filing Forms 941 and
W-2 for sick pay may solely be the third party's or shared with you, the
employer. When these responsibilities are shared, a clear understanding
of each party's reporting obligations can avoid IRS assessment of
employer penalties for failure to file required reports and/or for
filing inaccurate reports. For more information about sick pay, see IRS
Pub. No. 15-A, *Employer's Supplemental Tax Guide.*

**[BACK PAY AWARDS UNDER A STATUTE]{.underline}**

Employers should use Form W-2, magnetic media or electronic wage reports
to report back pay as wages in the year the amounts are actually paid to
the employee. Back pay awards are considered wages by IRS and SSA.
However, **special rules apply to back pay** **awarded** **under a
statute.**

Back pay awarded under a statute is a payment by an employer pursuant to
an award, determination or agreement approved or sanctioned by a court
or government agency responsible for enforcing a Federal or State
statute that protects an employee's right to employment or wages.

**IRS:** Treats all back pay as wages in the year the award is paid for
**taxation** purposes.

##### 

##### SSA: Credits a back pay award, if:

##### Not under a statute, as wages when paid; or

-   Under a statute**,** as wages in the year(s) it should have been
    paid.

**However, in order to credit wages paid** **under a statute**
**correctly, the employee or the** **employer must notify SSA**. For
details on how to report, see IRS Pub. No. 957, *Reporting Back Pay and
Special Wage Payments to the Social Security Administration.*

## **TERMINATING A BUSINESS**

IRS regulations require that if you terminate your business, you must
file Form W-2 information with SSA within one month after your final
Form 941 return is due to IRS; and the employee copies of Form W-2 must
be given to them by the due date of the final Form 941. For special
reporting instructions, contact the ESLO or wage reporting specialist in
your area or see IRS Rev. Proc. 96-57 released in Internal Revenue
Bulletin 1996-53.

## **REPORTING HOUSEHOLD EMPLOYEE WAGES**

Many people hire housekeepers, maids, baby sitters, gardeners, and
others to work in and around their home. Although sometimes
self-employed, generally, such workers are considered household
employees.

**If you pay cash wages of \$1,500 or more in one year to a household
employee or to:**

-   **Your child, age 18 or older, or**

-   **A person under age 18,** who performs household work as his or her
    principal occupation,

**you must withhold and pay Social Security and Medicare taxes.**

**Note: For exceptions to the above,** refer to IRS Publication 926,
*Household Employers Tax Guide.*

Household employers must file Schedule H (Form 1040); along with the
income tax returns they file with IRS to report their household
employees. However, if you are a sole proprietor who files Forms 941 for
your business employees, you may include your employment taxes for your
household employees on that form. If you do this, include the Form(s)
W-2 for your household employee(s) with the Forms W-2 for your sole
proprietorship when you file with the SSA. You must file Form W-2 with
SSA for household employees by the last day of February (electronic
filers can file a month later) following the year wages were paid. You
must submit a Form W-3 even when filing a single Form W-2.

**[REPORTING A MINISTER'S INCOME]{.underline}**

A church must report the minister's compensation by filing a Form W-2
with SSA by the last day of February of the year following payment of
the compensation. Remuneration paid to the minister by a church is
considered self-employment income, rather than wages. Therefore, the
church is not responsible for withholding Social Security, Medicare or
income taxes. However, at the minister's request, a church may withhold
income taxes from his or her compensation. This is done by having the:

-   Minister complete Form W-4 (Employee's Withholding Allowance
    Certificate.),

> and

-   Church includes the withholdings on Forms 941 that are filed for its
    other employees. (However, for the minister, no amounts are to be
    shown in the Social Security or Medicare wage entries of Forms 941.)

The Form W-2 for the minister will show money amounts only in:

-   **Box 1** (Wages, tips, other compensation),

-   **Box 2** (Federal income tax withheld) if there is a voluntary
    agreement to withhold such taxes, and

-   **Box 14** (Other) if a parsonage or other allowance is provided.

If the **church does not withhold income taxes** from the minister's
compensation, the minister generally will need to use Form 1040-ES
(Estimated Tax for Individuals) to make payments during the year to IRS
if he or she will be responsible for \$500 or more in taxes for the
year.

For more information, see IRS Pub. No. 517, *Social Security and Other
Information for Members of the Clergy and Religious Workers.*

## 

## **REPORTING TIPS**

If part of your employee's income is derived from cash tips, Federal law
requires you to deduct Social Security and Medicare taxes from these
tips and wages. This includes tips from charge customers, and shares of
any tip-splitting arrangement. The employer matches the amount deducted
from the pay and sends both to the Internal Revenue Service. Wages and
tips are then reported to the employee's Social Security earnings
record.

Tips, as well as any other pay earned, are used to determine the amount
of Social

Security benefits received in the future. See IRS Publication 531,
*Reporting Tip Income,* for further information on tip income as well as
rules on allocated tips.

## **STATE AND LOCAL GOVERNMENT EMPLOYEES**

###### General Coverage Rules

There are three ways of providing Social Security and/or Medicare
coverage under the Federal Insurance Contributions Act (FICA) for State
and local government employees:

-   Employers may extend FICA coverage to their employees through
    voluntary agreements with SSA. These agreements are commonly
    referred to as "Section 218 agreements";

-   Employees who are not covered for FICA under Section 218 and were
    hired after March 31, 1986, are subject to mandatory coverage of the
    Medicare-only portion of FICA; and

-   Employees who are not covered under a Section 218 agreement or a
    public employer retirement system are mandatorily covered by FICA
    after July 1, 1991.

###### 

###### Reporting Rules

[MEDICARE QUALIFIED GOVERNMENT EMPLOYEE (MQGE)]{.underline}

MQGE (also referred to as "Medicare-only") Forms W-2 is filed separately
from Forms W-2 having full-FICA (Social Security and Medicare) wages.
MQGE Forms W-2 must be transmitted with a covering Form W-3 with
"Medicare Govt. Emp." checked in box b.

[EMPLOYEES COVERED FOR MQGE AND FULL FICA]{.underline}

Some State and local employees may be subject to Medicare-only (MQGE)
withholding **and** full-FICA coverage in the same reporting year. When
the employee is in a continuous employment relationship with the same
employer (same EIN) for the year, the employer has two reporting
options. The employer may:

-   Prepare a single Form W-2. For **both** employment positions show
    the total annual wages in box 1, the total Medicare wages in box 5,
    and the total Medicare taxes in box 6. For the **full-FICA**
    employment, the Social Security wages and taxes are entered in boxes
    3 and 4, respectively; (SSA prefers using this method), or

-   Prepare a separate Form W-2 for each withholding category, i.e.,
    [one]{.underline} Form W-2 includes wage data for just the MQGE
    employment; the [second]{.underline} Form W-2 includes wage data for
    just the full-FICA employment.

Contact your State Social Security Administrator's office for more
information concerning Social Security reporting and coverage. A list
containing the State Social Security Administrator for your State is
available on the website of the National Conference of State Social
Security Administrators at: www.ncsssa.org. You may also order IRS Pub.
No. 963, *Federal-State Reference Guide,* by calling IRS at
1-800-829-3676. This publication is also available from their website
at: www.irs.gov/govts.

**HOW SSA PROCESSES WAGE REPORTS**

All **wage reports** (Form W-2 information) sent to SSA are subject to:

-   Editing and balancing programs to determine if the reports are
    accurate and can be "read" by SSA systems.

-   Employee name and Social Security number (SSN) verification.

-   Return to the employer (or submitter) for correction and
    resubmission

> if unreadable and/or inaccurate or do not meet certain tolerances.

All **employers** are subject to IRS **late filing penalty**
assessments.

**Note:** If your initial report was on time, but was returned to you
for corrections, you will be subject to late filing penalties if the
corrected report is not resubmitted on time to SSA.

## 

After wage reports have been entered into SSA's system, each employee
name and SSN are compared to SSA's records to verify that they are
correct. Matched wage reports are updated to the individual employee's
record. Reports that do not match are identified and the employee is
notified and is asked to provide corrected name and number information
to SSA. The employer is also contacted and requested to submit corrected
information. Once resolved, SSA posts the reported earnings to the
employee's record.

See page 11 for information on how to verify SSNs.

# SSA AND IRS RECONCILIATION PROCESSES

As SSA processes employer wage reports, it maintains a record of total
Social Security and Medicare wages and tips processed for each employer.
These totals are then compared with the totals for IRS employment tax
records filed by the employer with IRS on Forms 941, 943 and Schedule H
(Form 1040) returns. Employers whose reports to IRS and SSA do not
balance are contacted for an explanation of the discrepancy and asked
for additional wage evidence.

-   IRS contacts employers who reported more wages to SSA than to IRS.

-   SSA contacts employers who reported more wages to IRS than to SSA.

Failure to resolve these discrepancies may result in IRS assessment of
penalties for filing incorrect reports. See page 15 for ways to reduce
reporting discrepancies.

**MONTH-BY-MONTH EMPLOYER WAGE REPORTING RESPONSIBILITIES**

## 

## **JANUARY** 

-   Determine new Social Security wage base to be used for the current
    year

-   File Form 941 with IRS for last quarter of previous year

-   File Form 943 with IRS for prior year

-   Give employees their copies of Form W-2 for last year

######## FEBRUARY

-   Match Form 941b and 943 totals with payroll records and Form W-3
    totals

-   File copy A of Form W-2 and Form W-3 information with SSA

-   Food service employers with more than 10 employees must file Form
    8027 for their employees who receive tips

-   Withhold at single rate with no allowances if employees claiming
    exemption from withholding did not file a new Form W-4 as required

######## 

######## MARCH

-   (Throughout year) respond timely to SSA request(s) for corrections
    to Form W-2 identity data

## 

## **APRIL** 

## File Form 941 with IRS file Schedule H for last year with income tax return

## 

## **MAY** 

## 

## **JUNE**

## 

## **JULY**

## File Form 941 with IRS

######## 

######## AUGUST

**SEPTEMBER**

**OCTOBER**

-   File Form 941 with IRS

-   Order Forms W-2 and W-3 (if needed) for next year

######## 

######## NOVEMBER

-   Request MMREF instructions from SSA or IRS pub. No. 393 if not yet
    received

-   Test electronic or paper form processes for next year

-   Update your password so you can file W-2s using SSA's Business
    Service online

######## 

######## DECEMBER

-   Ask employees to update Forms W-4 and W-5

> **END-OF-YEAR PREPARATION FOR WAGE REPORTING**

The last quarter of the year begins the wage reporting "season" the time
to prepare for filing end-of-year reports for the tax year.

**By October,** order from IRS or your forms supplier:

-   Wage reporting forms W-3 and W-2

The IRS forms request telephone number is 1-800-829-3676.

**By November**, IRS will mail you:

-   *Federal Employment Tax Forms,* IRS Pub. No. 393*.*

This publication includes Form W-3, two Form W-2 sets, instructions for
Form W-2 and an order blank for requesting additional forms and
instructions. A gummed label for Form W-3 showing employer's name,
address and employer identification number to identify the wage return
is included in the envelope.

**By November**, if you file reports electronically, SSA will mail you:

-   The *Magnetic Media Reporting and Electronic Filing (MMREF-1)*
    booklet. This contains specifications and edits for filing wage
    reports electronically. If you have not received your booklet by
    mid-November call the Employer Services Branch at 1-800-772-6270 or
    call your Employer Service Liaison Officer. For your area's ESLO
    (see pages 34-37) or go to SSA's website at www.socialsecurity.gov.

**Before December**, you should advise your **employees** to:

-   Update their **withholding** form, if necessary. A new Form W-4
    (Employee's Withholding Allowance Certificate) must be completed to
    change tax withholding.

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-   Report any **name change** to SSA and obtain a corrected Social
    Security card.

Employee names and Social Security numbers that you submit on your
annual wage

reports are matched against SSA records. An employee's wages may not be
credited

to his or her SSA record and the employer may be subject to **IRS
penalties** if this

information does not match; and/or

-   File a new Form W-5 (Earned Income Credit Advance Payment
    Certificate) to continue receiving advance payments of **earned
    income credits.**

**By February 18^th^,** your employees:

-   Who claimed exemption from any Federal income tax withholding for
    the past year should file a new Form W-4 to continue exemption into
    this year.

**By February 19^th^,** you should:

-   Begin withholding at the single person rate with zero withholding
    allowances if employees, who previously claimed exemption from any
    withholding have not filed a new Form W-4.

> **SETTING UP FEDERAL TAX RECORDS FOR A BUSINESS**

**[EMPLOYER IDENTIFICATION NUMBER (EIN)]{.underline}**

As an employer, you are required to obtain a nine-digit EIN for
employment and tax reporting purposes. You do this by:

-   Obtaining a Form SS-4 (Application for Employer Identification
    Number) from either a local SSA office or IRS office, or the IRS
    Internet site at www.irs.gov, and

-   Completing and filing the application form with IRS.

### WHEN A NEW EIN IS NEEDED

If the way you organize your business changes, you may need to file a
new SS-4 and obtain a new EIN. You should apply for a new EIN if:

-   Your sole proprietorship incorporates.

-   Your sole proprietorship takes in partners and operates as a
    partnership.

-   Your partnership incorporates or your partnership is taken over by
    one of the partners and operated as a sole proprietorship.

-   Your corporation changes to a partnership or sole proprietorship.

-   You purchase or inherit an existing business that you will operate
    as a sole proprietorship. (You cannot use the EIN of the former
    owner, even if he or she is your spouse.)

-   You represent an estate that operates a business after the owner's
    death.

-   You terminate an old partnership and begin a new one.

**EMPLOYERS MUST USE THEIR EIN ON ALL ANNUAL WAGE AND EMPLOYMENT TAX
RETURNS AND ON ALL TAX DEPOSIT COUPONS**.

## 

## **BUSINESS RECORDKEEPING**

## 

## Under IRS laws and regulations, employers must set up and maintain a system of business records that support wage and employment tax reports. Retain records, including your W-2s, yearly W-3, and quarterly 941s for 4 years after the due date for the related returns. However, some States may require a longer retention period; contact your State tax agency for more information.

######## COMMENTS

Comments or suggestions to improve this material may be sent to:

Social Security Administration

Office of Income Security Programs

Office of Earnings Information Exchange

ATTN: Employer Guide Editor

1910 RRCC

6401 Security Blvd.

Baltimore, MD 21235