W-2 Verification Code Program is Expanding in 2017

I attended the October 5th payroll industry telephone conference call.  On the call Scott Mezistrano, with the IRS Industry Stakeholder Engagement and Strategy, provided the listeners with updated information on the W-2 Verification Code Pilot Program for the 2018 filing season (2017 Forms W-2).

Where the code appears

First just a quick review of the program itself.  It was implemented during the 2016 filing season. Its purpose is to combat tax-related identity theft and tax refund fraud.  It requires a 16-character code be input into box 9 so that the tax filer can be verified when filing taxes electronically.  It only appears on the Form W-2 copies B (filed with the employee’s federal tax return) and C (the employee’s copy).   If the Verification Code (VC) is deemed valid, then the IRS treats the W-2 data submitted with the Form 1040 to be valid, thereby reducing false fraudulently filed tax returns.

For the 2016 Forms W-2 only ADP, Ceridian, Intuit, Paychex, Payroll People, Prime Pay and Ultimate Software participated in the test pilot program. If the taxpayer had a VC it was entered 34% of the time. However, when it was entered, it was validated 97% of the time.

For the 2017 Forms W-2 there will be 10-12 service bureaus or payroll software companies participating in the program. This includes the same companies as in 2016 along with the National Finance Center and a few more payroll service providers.  This should result in approximately 66 million Forms W-2 containing the code.  That results to about 1 in 4 forms that will be filed.

 

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Anyone for E-IWO (Except SC)

Well the day has finally come when all the states (except South Carolina) are now offering electronic Income Withholding Orders or e-IWO.  What exactly is an e-IWO and how does it differ from getting cheiwoild support orders on paper?  Very simply, by using the e-IWO employers receive their Income Withholding Orders (IWO) for child support electronically as a pdf file rather than through the snail mail on paper.  This saves a lot of time and expenses on the side of the state.  But the employer also gets to acknowledge the receipt electronically which saves time and money on that side as well.  In addition, the same portal also allows the employer to report terminations and lump sum payments electronically, again saving time and money.

All you need to do to partake in this system is to implement the e-IWO in one of two ways.  For large (I mean really large) employers with thousands of child support orders you could set up a system-to-system process.  This obviously is going to take a lot of programming and time.  But if you are a smaller employer with maybe only dozens of child support orders or less you could set up the No Programming option.  This is just like setting up your phone really. You just set up the port etc. and then begin receiving the IWOs.  Takes just a few weeks but well worth it in terms of time and money saved.

Want more info before making the plunge to electronic then check out the Office of Child Support Enforcement’s website on e-IWO. There you will find all the info you need on setting up the different systems as well as FAQs. Want to speak to someone directly about the program.  By all means contact William Stuart @william.stuart@acf.hhs.gov.  Bill will be glad to answer your questions, give you back ground info and even give you info on other employers, who are just like you, so you can speak with them about the system.

Electronic is the wave of the future for payroll so don’t be left out and holding the paper form when everyone else is going paperless with their IWOs.  The system is up and running so now is the time to check it out and start using it.

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Pay Stubs are Not W-2s–Duh?

I received an update recently from the Colorado Department of Revenue on a blog post they did on January 6th concerning paystubs and Forms W-2. 2015 form w-2 Now in my payroll departments I have always stated emphatically in my year end memo that you can not interchange the two forms and you cannot submit your taxes using the paystub.  But the problem seems to be that some tax preparation services are advertising “Bring us your pay stubs and we’ll file your tax return.”  So it seems that payroll departments need to gently remind their customers that you have to wait until the W-2s are released by payroll before you can file either on paper or electronically.

California Enacting Electronic Filing Requirement for All Employers

The state legislature has passed AB 1245, a bill that requires California employers of 10 or more employees to submit quarterly payroll tax returns and pay the associated payroll taxes electronically over the California Employment Development Department website starting in 2017. The bill also requires all employers to file and pay electronically effective January 1, 2018. The bill awaits the governor signature and he is expected to sign it.

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UT Moves W-2 Filing Date for 2016

Effective January 1, 2016 all employers must file Form TC-941-R, Utah Annual Withholding Reconciliation, and corresponding Forms W-2 (and 1099 with Utah taxes withheld) electronically by an accelerated due date of January 31 of the year following the calendar year for which the forms pertain with the Utah State Tax Commission.  The change is due to the passage of SB 250, which was signed by the governor on March 30, 2015. Currently, the deadline to file Forms TC-941R and W-2/1099 with the Commission is February 28 if filing on paper or March 31 if filing electronically.  The new due dates apply to the 2015 calendar year filings. However the actual due date will be February 1, 2016 as the 31st is on a Sunday in 2016.

In addition, the penalties for failing to file the forms electronically by the January 31 due date are as follows:

  • $30 per form, not to exceed $75,000 in a calendar year, if the employer files the form more than 14 days after the due date, but no later than 30 days after the due date;
  • $60 per form, not to exceed $200,000 in a calendar year, if the employer files the form more than 30 days after the due date but on or before June 1; or
  • $100 per form, not to exceed $500,000 in a calendar year, if the employer files the form after June 1; or fails to file the form.

UT Expands Electronic Filing in 2016

Recent legislation ( S.B. 250) passed in Utah is expanding the types of forms that must be filed electronically by employers and moving the due dates. The employer’s annual income tax withholding return must be filed electronically by January 31 of the year following that for which the report is made. The old due date was February 28.

In addition, an employer that issues any of the following forms for a taxable year must file the forms with the commission on or before January 31 in an electronic format approved by the commission:

  • a federal Form W-2;

  • a federal Form 1099 filed for purposes of withholding; or

  • a federal form designated by the commission as substantially similar to a federal Form W-2 or federal Form 1099.

Under prior law, an employer that was required to file a federal Form W-2 in an electronic format was also required to file Form W-2 electronically for Utah income tax withholding purposes. However, there was no prior requirement to electronically file Form 1099 or any similar form for state withholding purposes.

WV Imposing Failure to Pay by EFT Penalties

Per a West Virginia State Tax Department website notice, taxpayers required to pay by electronic funds transfer (EFT) will be subject to a 3% civil penalty applied to any payment received on or after March 1, 2015, if the payment is not made by electronic funds transfer (EFT) and a waiver to pay electronically has not been obtained.