If you have employees working for you, Form W-2 is mandatory to file even if you have a single employee. This is a tax form that reports all the income paid to the employee during the course of the tax year. It also shows the tax withheld from the employee’s salary.
Since employees will use their W-2 to file a federal income tax return, they need it before April 15 but the deadline for furnishing employees with Form W-2 is much earlier than that. In 2021, you have until January 31st to file and furnish employees with their wage and tax statement. If done later than this date, the IRS will impose a monetary penalty. The penalty for late filing Form W-2 starts at $50 and increases for every 30 days Form W-2 is late.
30 Day Rule for Late Filing
For Forms W-2 filed after 30 days of the due date, the penalty amount is $50. For every 30 days between March 1st and August 1st, the penalty amount will increase by $100 per W-2. As soon as you’re late, your employer will have the option to file Form 4852 which works as a substitute for Form W-2. But for this to be completed accurately, your employee(s) need their last pay stub. If you’ve processed payroll for the entirety of 2021, your employees can use theirs to file a federal income tax return without Form W-2.
All and all, the deadline to file Form W-2 is January 31st. The penalties will add up until August 1st and if Form W-2 isn’t filed then, the IRS may impose different penalties rather than monetary ones.
We suggest filing Forms W-2 for employees as soon as possible after the 2020 tax year ends. So that not only you would avoid penalties but your employees wouldn’t go through the trouble of filing a Form 4852 to replace their W-2 when filing a tax return in 2021.