Form W-3 Overview

Published: January 15, 2024 by Joe Grimes

Tax management may not come easy to business owners. A number of forms to fill out by different deadlines makes a long list and achieving compliance seems like a daunting task. Form W-3 is on that list, but the good news is that the form itself is not as complex as many others required by the payroll tax legislation.

Unlike some others, this form, also known as the Transmittal of Wage and Tax Statements form, has not seen many changes over time, which is another relief. However, mistakes can be made even in simple procedures, and rules and regulations, valid forms, and deadlines should not be taken lightly. That is why we share some essential tips for the seamless handling of Form W-3.

What Is the Form W-3 Purpose?

Form W-3 reports the combined employee income to Internal Revenue Service (IRS) and the Social Security Administration (SSA). It is a summary document, totaling up and verifying all the Form W-2 data for the previous year. By compiling individual wages and tax statements, businesses supply information to authorities about their overall payments related to employment.

Every employer that has an obligation to file Form W-2 will have to file Form W-3 as well. The Form W-2 requirement applies to every employer who, in the course of the previous year, hired employees and paid them over $600. In other words, most employers in the U.S. will be required to file form W-3.

What Differs Form W-3 from Form W-2?

As previously mentioned, the two forms mirror each other and it is understandable how an employer can mix them up — but only at the beginning, before the true work on the data collection and entering is underway. The employees have a duty to supply the data for Form W-2 and not for the W-3. Employers summarize all individual W-2 forms to feed into a single Form W-3 and file it along with a Copy A of each employee’s Form W-2 every year.

Unlike W-2 copies that need to reach several destinations, including the SSA, tax departments on city and state levels, and employees in question, employers deal with only one Form W-3 copy, and only one recipient – the SSA. No tax payments or charges are associated with the submission of the form.

In addition to this, employers need to pay attention not to mistake Form W-3 for another form, also involved in the same subject matter, payroll taxes. It is Form W-4, which needs to be filled out by a new employee to indicate to the employer how much income tax to withhold from their wages.

How to Fill Out Form W-3?

This simple form requires employers to supply:

  • Their business details, including their Employer Identification Number (EIN), legal address, and contact information;
  • Wages, tips, other compensation;
  • Income tax withheld;
  • Social security wages;
  • Social security tax withheld;
  • Medicare wages and tips;
  • Medicare tax withheld;
  • Deferred compensation,
  • Dependent benefits; and
  • Social security tips.

The requested information employers need to pull out from payroll records, employee W-2 forms, and other supporting documentation they use for tax administration purposes. It is important to double-check the data and carefully calculate the totals to ensure that matching results are presented to authorities in different forms.

As the information entered in Form W-3 pertains to the business dealings in the year prior to form submission, there is only one deadline, same for both the paper and electronic submission – January 31 of the next year. This is also the deadline for submission of Form W-2 files so it should not be easy to miss. If the date falls on a weekend, the deadline is the next business day.

When it comes to Form W-3C, this version only comes into play when a mistake needs to be corrected. The added letter C, therefore, stands for correction, i.e. Transmittal of Corrected Wages and Tax Statements.

What Format to Choose for Filing W-3?

The authorities express a strong preference for the electronic filing of Form W-3. They have been phasing out the paper from the records and encouraging employers to use online systems for quite some time now. Bigger employers no longer have a choice — if submitting over 250 W-2 forms, electronic submission is the only possible option, except in special circumstances. Both IRS and SSA have put a significant number of tools at disposal of employers, to facilitate electronic filing. Every employer who chooses to do so does not need to worry about ordering the form from the IRS website and mailing it but gets a digital copy generated on the SSA Business Services Online (BSO) website.

Employers eager to upgrade their businesses would want to know the best way to do it. That is, by all means, having a reliable partner and outsourcing this duty to them, through integrated digital solutions available nowadays.

Form W-3 Benefits with Digital Tools

However straightforward and undemanding the Form W-3 seems, there are a great many technicalities to observe and a lot of time to invest to get it right and remain compliant. Finding a way to improve payroll tax efficiency means taking some or all the burden of these technicalities off the payroll department’s shoulders whenever possible.

The tax administration duties will become easier to handle by taking the digital route in this area. That means letting the tax professionals handle the necessary tasks and procedures while using the latest available payroll tax succession software.

Outsourcing the payroll duties to a reliable platform enables you to grow your business while remaining compliant with regulations and up-to-date with your operations, balance, and tax liabilities.

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