Years ago, W-2 forms were fairly straight-forward, reporting wages paid to your employees along with tax withholdings. The days of simple W-2’s are long gone! Wages reported in boxes 1, 3 and 5 for income, social security and Medicare tax withholdings are frequently 3 different amounts – and confusing to your employees. The number of IRS required alphabetical “codes” in Box 12 range from “A to Z”, and are now on “round 2” of the alphabet with “codes” AA- FF”. Box 12, Code “DD” reports the combined employer – employee cost of employer – sponsored health insurance premiums for 2021 and is for information purposes only (only required by employers who issued over 250 W-2 forms for 2020).
Ever had an employee ask you a question about amounts reported on their annual W-2 form?
AccuPay has prepared a memo titled “How To Read Your W-2”. Feel free to download the document and provide copies to your employees and colleagues.
Our recommendations to employers about their 2021 employee W-2’s are as follows:
- Download the “How to Read Your W-2.” This memo will answer many of your employees’ questions about their W-2 forms.
- Box 14 on the W-2 form provides employers with an opportunity to report “non-required” payroll information to employees. We have included examples of Box 14 reporting on our downloaded memo.
- IRS Notice 2021-53 requires that an employer report all FFCRA and ARPA wages paid to employees during 2021 in box 14 OR in a separate statement to the employee which must accompany the issuance of the W-2 form to the employee. The reporting of these wages must include amounts, by Act (FFCRA or ARPA) and by each of the three types of conditions. It is our understanding that the IRS and SSA do not reconcile FFCRA/ARPA wage amounts for 2021 between W-2’s and the four quarterly IRS 941 payroll tax returns. AccuPay included these amounts in box 14 for all applicable clients. Be sure to review W-2’s to ensure all FFCRA/ARPA amounts were reported.
2021 Federal Withholding Tax
The IRS has instructed employers to have all new employees complete the new W-4, first released in 2020, with ongoing employees permitted to continue using their “pre-2020 W-4” form if they so choose. Employers are required to have federal income tax withholding tables which will calculate income tax withholdings for either pre-2020 W-4 forms (those with allowances/exemptions) OR will calculate federal tax withholding based on the dramatically different and new W-4 form. AccuPay’s payroll system/software has been programmed with the capability of calculating tax withholdings for both types of W-4 forms.
If you would like further details about employer “best practices” regarding employee W-4 forms, click here to read our PayDay’s on this subject matter.
We have a passion for “payroll excellence”. We love ideas from our clients on how we can improve our services. Call us at 317-885-7600 or email Larry@accupay.com with your ideas/input on how to improve our services!