What is a W3 form and how do you complete it for your business?
Most small businesses are familiar with Form W2 or Form W4, but what about Form W3?
Sounds alien, right?
Luckily, if you are familiar with the W2 form, the W3 form may seem like child’s play. That being said, a responsible taxpayer must have a solid understanding of liabilities. And the moment you hire your first employee, you are required to complete the W3 form.
So what you create an LLC in Texas or open a store in California, here’s everything you need to know about the W3 form.
What is a W3 form?
The Transmission of Wage and Tax Return, or Form W3, is an addendum to Form W2. In fact, it is a summary of the W2 form and abstract your employee information, such as:
- Total earnings, including salaries, tips, monetary compensation, allocated tips, etc.
- Federal and state income tax withheld.
- Health Insurance withholding tax and social security contributions.
- Deferred compensation.
- Benefits for dependents.
- Unqualified plans.
- Employer identification number and professional contact details.
- Number of employees and number of W2 forms filed.
Given its aggregated nature, Form W3 serves to verify and validate the accuracy of Form W2 details. It also grants a formal reconciliation of quarterly taxes paid for the year.
How is the W3 form different from the W2 form?
W2 and W3 forms are often confused due to their similar nature. However, they are not the same, the main differences being:
- To start, employees file Form W2, while employers file Form W3 (along with Form W2).
- Employees must file Form W2 with the Social Security Administration (SSA), the employer, and the local tax department. On the other hand, the W3 form is filed by the employer with the SSA.
- Since the W2 form is sent to various sources, employees may submit multiple copies. The employer files only one copy of the W3 form even when filing for multiple employees.
- The W2 form is employee specific and the W3 form is company specific.
Who needs to file a W3 form?
If your business is required to file one or more W2 forms, you are also required to file the W3 form with the SSA. In other words, if you:
- Withholding any income, taxes, Social Security, or Medicare wages; Where
- Pay $600 or more in salary (even if you don’t withhold anything)
Then you must complete the W2 and W3 forms.
How to complete a W3 form?
Forms W2 and W3 can be filed online or by mail. You can even have a tax assistant fill them out for you. These have been discussed as below:
To file Forms W2 and W3 electronically, you will need to register on the Online Business Services (BSO) platform hosted by the SSA. Once logged in, the BSO will automatically pre-fill the W3 form based on the data from the W2 form. Electronic filing of Forms W2 and W3 is mandatory if you are filing for more than 250 employees. Depending on the number of employees and available resources, you have two options:
- You can choose to fill in the W3 form manually (ideal for less than 50 employees) after verifying the information filled in automatically in the W3 forms.
- Alternatively, you can also file the W3 form using payroll or tax software that you may otherwise use to file. digital tax. This route works if you have more than 50 employees in your company. However, remember that files you upload through payroll or tax software must meet the SSA guidelines.
The fact that e-filing is faster, more secure and more accurate tips the balance in its to favor.
Filing by mail
Although the SSA has made arrangements for the electronic filing of Forms W2 and W3, small businesses can file by sending in the forms. Note that in this case, you will need to order the hard copies of both forms from the IRS, as these cannot be fully downloaded and printed from the official website, as copy A of the form is printed at the special red ink.
Once you have entered your details, you can send the forms to given address here (under “Where to file paper Forms W-2 and W-3”).
Filing through an accountant
If you’re not the do-it-yourself type or just find the taxes confusing, you can hire a professional for this task. An accountant can calculate any overdue payment or deposit and complete the forms on your behalf.
When should you file Form W3?
The IRS and SSA are considering annual filing of Form W3; therefore, you will need to file it once a year.
The annual deadline for filing Form W3, as well as Form W2, is January 31.
For to summarize, although filling in the details of the W3 form may seem overwhelming, it is just a matter of adding all the details contained in the W2 form. In a way, it duplicates and validates the data entered in the W2 form and corroborates the information on the employer and employee side.
Fortunately, there are a ton of resources made available by the SSA (through its control List) and the IRS (via its video) to make this process as easy as possible. So stay one step ahead of your tax obligations!
Authors biography :
Matt Horwitz is the founder of University LLC, a website that teaches people how to form LLCs. Matt is the leading authority on education LLC and is featured in CNBC, Yahoo Finance, Entrepreneur Magazine and the US Chamber of Commerce. Matt holds a Bachelor of Commerce degree from Drexel University with a concentration in Business Law. LLC University®, established in 2010, was the first company to create free LLC courses in all 50 states.