IRS Announcement 2002-108

The IRS reminded taxpayers on December 9th that separate reporting of nonstatutory stock option income in Box 12 of the Form W-2, using code V is mandatory for 2003.

Magnetic Media for Quarterly Returns

The New York Department of Taxation and Finance and the New York Department of Labor invite payroll processors to file quarterly returns for Withholding Tax, Wage Reporting and Unemployment Insurance on magnetic media. This program will help reduce your burden in submitting returns for your clients, reduce the paper you are submitting and also insure that data is captured accurately.

W-2 Scanning Guidelines

The Wisconsin Department Of Revenue reminds payroll service firms to produce high quality employee-copy W-2s, to enable efficient scanning.

File-Edit Tips for Payroll Services

The Social Security Administration provided recently suggested "File-Edit Tips for Payroll Services",which include W-2 reporting edits and program features that are recommended for payroll service providers. With some exceptions such as reasonableness checks against the prior year, the suggestions are best implemented through use of the SSA's free ‘Accuwage’ software.

New IRS Penalties Planned for W-2 name/SSN mismatches

In meetings with NPRC members, the IRS confirmed that penalties will be assessed in 2004 for inaccurate names and/or SSNs on W-2s filed for 2002.

  • Penalties will be %50 per W-2, up to a maximum of %250,000 per employer
  • Penalties will apply to employers who have more than 10 errors, and who have errors in at least 1/2 of one percent (.5% or ..005) of W-2s.

The recent IRS article, “Accurate W-2s Avoid Costly IRS Penalties”, was intended to raise employer awareness of the issue and the potential for penalties.

The IRS is considering various proposals for ‘reasonable cause’ to waive/abate these penalties; which may include documented use of SSA's SSN Verification System. The IRS may also consider a check-box on the W-2 to indicate that the employer is aware that an SSN and name does not match; that SSA's SSN verification service was checked; and that a new W'4 has been solicited or other actions taken. This would enable the IRS to bypass the record for penalty purposes.

In addition, the IRS is considering penalty assessments for employers with the most errors and highest percentages of 2001 W-2 errors, which may take place in the fall of 2002.

Florida Requires Businesses to E-file Unemployment Taxes

TALLAHASSEE - As of January 2003, a new state law requires electronic filing of unemployment compensation tax quarterly reports and electronic payment of tax for businesses that had 10 or more employees in any calendar quarter in the 12 months ending June 30. Florida's mandate for electronic filing/payment of UI wage and tax reports and payments is unusually broad. For comparison:

  • Thirty-four states require employers to pay withholding tax electronically
  • Eighteen states mandate magnetic media W-2 reporting
  • Thirty-eight states require magnetic media quarterly UI wage reports

Florida is the first UI agency to require electronic payments and electronic transmission of UI tax reports, and UI wage reports (no magnetic media allowed!). Technical formats are as yet undefined. For more information, see

New York City withholding tax tables and methods have been revised effective June 1, 2002

New IRS Information Reporting Website Announced

The IRP Website centralizes information about the Information Reporting Program requirements to one location, including information about how to file information returns electronically, and current issues from the IRS Information Reporting Program Advisory Committee (IRPAC).

Disaster relief for 4Q2001 returns

Relief from penalty granted as a result of the 9-11 Terrorist Attack extended into 4th Qtr 2001. If you have clients eligible for the relief, their Forms 941 and, if impacted Form 940, should be filed on PAPER with the declaration (in red). Please see the previously issued guidance for details. Additionally, any other type of tax, the payment or filing of which was delayed due to the Terrorist Attack, should be filed on paper with the disaster declaration.

Courtesy of Paul Sobert of the IRS