A couple of important deadlines have been moved up starting in 2017. Employers are now required to provide copies of Form W-2 to employees AND file copies with the Social Security Administration (SSA) by January 31. In addition, Forms 1099-MISC that report amounts in BOX 7: Nonemployee Compensation, must be submitted to the IRS by January 31.
In the past, employers had until the end of February, if filing on paper, or the end of March if filing electronically to submit copies of these forms. Unfortunately, there is no extended deadline for filing electronically. Only one 30-day extension to file Form W-2 is available and this extension is not automatic. If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as you know an extension is necessary, but by no later than January 31.
The deadline changes stem from the Protecting Americans from Tax Hikes (PATH) Act that was enacted last December. Its goal is to make it easier for the IRS to detect and prevent fraud by spotting errors on returns filed by taxpayers. Having W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them.
The impacts of these new deadlines on businesses are significant. An earlier deadline means that after employers mail forms to recipients, they will no longer have one last chance to validate or correct data before making the transmittal to the SSA or IRS. This means less time to comply and more opportunity for errors, which could mean more penalties at the recently increased rates. "Increase rates for penalties?" you may be wondering. That's right. According to a notice issued by the IRS in October:
Penalties for failure to file correct information returns and/or to furnish correct payee statements have increased and are now subject to inflationary adjustments. Information returns and payee statements include, for example, Forms 1098, 1099, W-2G and W-2.
Per Section 208 of Public Law (P.L.) 113-295, effective for information returns required to be filed in a calendar year beginning after 2014, the base penalty rates and maximum penalties are subject to annual inflationary increases. Section 806 of P.L. 114-27 increased the base penalties for failure to file correct information returns and provide correct payee statements for returns required to be filed after December 31, 2015.
Visit the IRS website for a detailed list of the increased penalty amounts. To avoid fees from having W-2s and 1099s getting "lost in the mail," we recommend sending them Certified Mail through the USPS or have some type of tracking through UPS, FedEx, or other delivery service. Certified Mail provides senders the ability to see when it was delivered or that a delivery attempt was made. These receipts also show proof that your information returns were mailed timely.
As your accountants and advisors, we are always available to help you navigate changes and comply with new deadlines. Please let us know if you have any questions!