A third party relocation vendor accidentally classed some expenses as non taxable for a prior year. It wasn't until early in to the new year that they realized the error and contacted our organization. The population was just around 1,000 employees, give or take a few hundred. Without hesitation, a senior manager decided that the whole department would stop their work and prepare W2-Cs. While this was a well intended order, there was very little training for the department of pretty green payroll professionals.
Needless to say, the mess grew until VPs realized it was out of control. We had made more work for ourselves by not properly training our team on how to prepare a W2-C. In theory, they seem pretty easy. Truthfully, they are just math. However, when folks do not really understand the dos and don'ts of W2-C preparation you can really mess up an employee's amended return.
In case you yourself are not very savvy with preparing a W2-C, here's a few tips:
File a W-2c form to correct all errors. The exception: Most errors in Box 2, federal income
tax withheld, aren’t correctable. If, due to a Box 2
error, employees were over withheld, they’ll get larger refunds; if they were under withheld,
they’ll owe more tax.
Exception to the exception: Correct Box 2 errors if the errors are administrative (e.g.,
transposed numbers). Important: Even if Box 2 isn’t corrected,
correct related errors in Boxes 1, 3, 4, 5 and 6.
Do enter $0 in an appropriate box, if
that’s the result of a dollar change.
Don’t zero-fill W-2c boxes you’re not correcting; leave them blank.
Do file Form 941-X by April 30 to report
FICA under withholding and over withholding errors discovered on prior year W-2s.
Don’t file a W-2c with the
SSA if you’re correcting only state/local information; send the form to the
state/local agency.
When in doubt, connect with a tax expert, or call in the big guns like a Deloitte or PWC consultant.
