Filing Requirements

• You must file W-2 forms if you own a business and pay your employees in either cash or non-cash, if you withheld Social Security, Medicare or income taxes, or they would have been withheld if the employee claimed no more than one exemption on his W-4 form. You must file a W-3 form to transmit your W-2 forms to the IRS. Retain Copy D of the W-2 forms for your records. Make a copy of the W-3. If you file with paper, you must file by due date for that tax year, generally on the last business day in February -- the first business day in April for electronic filers. You can request an extension before the deadline, but it will not exceed 30 days.
  
  

Penalty Assessment

• If you file your W-2 forms late, or incorrectly, you may be subject to penalties unless the IRS believes you had reasonable cause. You can be charged a penalty if you did not file on time; you excluded, or reported incorrectly, required information on the W-2s; you filed on paper when you are required to file electronically; you failed to report a Taxpayer Identification Number (TIN) or report an incorrect TIN; or you filed on non-machine-readable paper.
  
  

Penalties Assessed

• Penalties for failure to file your W-2s on time, or correctly, are assessed based on when you corrected the failure. If you file correctly within 30 days after the due date, you are assessed a penalty of $30 per W-2 form, not to exceed $250,000 or $75,000 if you are a small business -- defined as having average gross receipts of less than $5 million over the last three tax years. If you file more than 30 days after the due date, but before Aug. 1, you pay $60 per W-2 form up to a maximum of $500,000 -- $200,000 for small businesses. If you file after Aug. 1 or neglect to file at all, your penalty is $100 per W-2 up to $1.5 million -- $500,000 for small businesses. Inconsequential errors are not counted toward penalties, but errors involving the TIN, money amounts or the payee's surname or address are never considered to be inconsequential.
  
  

Willful Disregard

• If the IRS finds you showed willful disregard in filing your W-2 forms, your penalties increase. If you intentionally did not file the W-2 forms, or you intentionally filed incorrect W-2 forms, your penalty is $250 per W-2 form with no maximum penalty. If you willfully file a fraudulent W-2 that claims you paid someone you didn't pay, that person may be able to file a suit for damages, which could cost you $5,000 or more.