Time for Those W-2’s

For us accountants January brings the greatest payroll function of the year; printing the year end payroll reports. These include the W-2’s, W-3 and Form 940. They all must tie to the combined total of the quarterly 941 reports and the deposits made to the Internal Revenue Service.

Each year the Internal Revenue Service requires employers to process the annual payroll reports by January 31. How do you process the W-2’s?  The W-3?  Form 940?

Whether you have one employee or 100, you total wages as reported in the four quarterly 941 reports must equal the combined total of all W-2 wages as reported in Line 1. In addition, total income taxes withheld from the paychecks should equal Line 2 of the combined W-2’s. Remember wages equals the gross wages paid less any allowed exclusions from wages including contributions to Section 125 plans or other amounts allowed to be excluded under the IRS Code. 

Make sure that the total Social Security Wages equals the total reported via the quarterly 941 reports. If not, then verify each quarter for Form 941 that they are correct. If not, file Form 941-C to correct the reported amounts to the IRS. This also includes the Medicare wages and the amounts withheld for the Medicare Tax. It is possible for the Gross Wages to not match Social Security Wages and/or the Medicare Wages. The key is that the combined total for these three line items have to match what was reported via the quarterly Form 941’s. The most common reason for not matching is associated with running a payroll after the quarter ended in that quarter. Either some bonus check or a loan that is then incorporated as payroll is a suspected culprit. This is not uncommon and requires corrections filed with the IRS.

Once all the Line totals match, you have assurance that the W-2’s will be correct when printed. Once the W-2’s are printed go ahead and print the W-3 right away. The W-3 is the Transmittal of Wage and Tax Statements is nothing more than a cumulative total of the line items. This is the cover page that is submitted to the Social Security Administration with a copy of the W-2’s attached.

Once you have completed the W-2’s and the W-3, prepare the Form 940– Federal Unemployment Tax.  

Please be sure to file the forms no later than January 31 to the following organizations/individuals:

  • Form W-2 and W-3    Social Security Administration
  • Form W-2                   Employee batch to each employee
  • Form 940                    Internal Revenue Service

There are state requirements to file a copy of the W-2 with your state. Please be sure to file these by the date of your state’s revenue department’s deadline. Most states require a compilation and reconciliation of the W-2’s to the amount of state income taxes withheld and paid.

If a former employee failed to update their address with you, you are only required to mail their W-2 to the last known address. If the W-2 comes back to you, you must retain the record for at least 3 years. More than likely the former employee will call you when they need to file their return and will ask you to mail the document to their current address. Note your files and you have complied with the Code.

If there is an error, the Social Security Administration will send a request to reconcile the quarterly reports to what your reported to them. This usually occurs about one year later. The most important thing to remember is paying the taxes. Make sure that all taxes have been paid and were paid on time.

If you have any questions or concerns, contact me via the comments section below and I’ll get back to you to help you out. Act on Knowledge.

Value Investing

Do you want to learn how to get returns like this?

Then learn about Value Investing. Value investing in the simplest of terms means to buy low and sell high. Value investing is defined as a systematic process of buying high quality stock at an undervalued market price quantified by intrinsic value and justified via financial analysis; then selling the stock in a timely manner upon market price recovery.

There are four key principles used with value investing. Each is required. They are:

  1. Risk Reduction – Buy only high quality stocks;
  2. Intrinsic Value – The underlying assets and operations are of good quality and performance;
  3. Financial Analysis – Use core financial information, business ratios and key performance indicators to create a high level of confidence that recovery is just a matter of time;
  4. Patience – Allow time to work for the investor.

If you are interested in learning more, go to the Membership Program page under Value Investing section in the header above. 

Join the value investing club and learn about value investing and how you can easily acquire similar results with your investment fund. Upon joining, you’ll receive the book Value Investing with Business Ratios, a reference guide used with all the decision models you build. Each member goes through three distinct phases:

  1. Education – Introduction to value investing along with terminology used are explained. Key principles of value investing are covered via a series of lessons and tutorials.
  2. Development – Members are taught how pools of investments are developed by first learning about financial metrics and how to read financial statements. The member then uses existing models to grasp the core understanding of developing buy/sell triggers for high quality stocks.
  3. Sophistication – Most members reach this phase of understanding after about six months. Many members create their own pools of investments and share with others their knowledge. Members are introduced to more sophisticated types of investments and how to use them to reduce risk and improve, via leverage, overall returns for their value investment pools.

Each week, you receive an e-mail with a full update on the pools. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth. Joining entitles you to the following:

  • Lessons about value investing and the principles involved;
  • Free webinars from the author following up the lessons;
  • Charts, graphs, tutorials, templates and resources to use when you create your own pool;
  • Access to existing pools and their respective data models along with buy/sell triggers;
  • Follow along with the investment fund and its weekly updates;
  • White papers addressing financial principles and proper interpretation methods; AND
  • Some simple good advice.

Value Investment Club

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