You send all of your employees’ W-2 forms in the mail and sit back to relax.
You made it! All forms were sent on time, and all things tax compliance were wrapped up with a bow.
Then one or two, maybe even a few W-2 Forms, return unopened. Panic sets in. What do you do? Will you receive a penalty now? Will you have to pay a fine?
First: Don’t panic. Second: We’re going to tell you everything you need to do to ensure you’re still compliant.
A Returned W2: No Need to Panic
Under federal law, you must send each employee a Form W-2 - showing their wages earned and taxes withheld for the previous year - by Jan. 31.
If the deadline falls on a legal holiday or a Saturday or Sunday, the form should be distributed to employees by the next business day.
You can mail Form W-2 to the respective employee's address on file, or you can make the W-2 available electronically.
If the W-2 form is returned as undeliverable, what you should do depends on how you sent the form and whether the employee still works for you.
Reasons a W2 Might be Returned
The most common reason W-2 Forms are returned are:
- Incorrect mailing address: This is the most common reason for a W2 to be returned. If an employee moves and doesn’t inform you or update their address with you or the Social Security Administration, their W2 will be sent to the wrong address and returned.
- Incorrect employee information: This can happen if you enter your employee’s name, Social Security number, or other personal information incorrectly when generating their W2 form.
- Missing information: If any of the boxes on the W2 form are left blank or incomplete, the form may be returned by the government.
- Processing error: There may be instances where the form is rejected during the electronic submission process. This could be due to a technical issue or an issue with the formatting of the form.
- Postal service issues: Occasionally, mail can be delayed or lost in transit, which can cause W2 forms to be returned.
Steps to Take
W-2 sent by mail1. Do not open the envelope with the returned W-2. The sealed, postmarked envelope is evidence that you mailed the W-2 by the deadline.
2. Make a photocopy of the sealed, postmarked envelope and retain the copy for your records. Then, cross-check the address on the returned envelope against your records.
3. If there's an error on the returned envelope:
- Prepare a new envelope with the right address, as shown in your system.
- Put the sealed, returned W-2 into the new envelope.
- Mail the new envelope to the employee.
4. If the address on the returned envelope mirrors your records and the employee still works for you:
- Ask the employee to verify his or her address in writing.
- Update the employee's address in your system.
- Place the sealed, returned W-2 in a new envelope.
- Mail the new envelope to the employee.
Note: You can hand deliver W-2s. In this case, consider having the employee sign to acknowledge receipt.
If the employee no longer works for you, things could get tricky.
You can try to contact him or her via phone or email. If you fail to reach the employee, there's not much else you can do. Just be sure to keep the W-2 on file for at least four years, as required by the IRS.
Also, document your attempts to contact the employee.
W-2 sent electronically
Employers that provide electronic access to Form W-2s must follow the guidelines in IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3. This includes obtaining the employee's consent to receive W-2s electronically.
If you do not have employees' consent, then you must inform them that they will receive a paper W-2. Further, you must tell those who have consented how to access the document electronically.
If your email notifying an employee of electronic W-2 access is returned as undeliverable, you have 30 days thereafter to provide notice by mail or in person.
Take the following steps if an electronic W-2 is returned:
- Make sure you have the correct email address and that their email is functioning properly.
- Verify that the returned email is not in the spam or junk folder.
- Check that your employee’s email account hasn't blocked the email from your server.
- Forms may be returned due to transmission issues like formatting or technical errors. Try resending the form or providing the employee with a new download link.
What to do if you Can’t Locate an Employee
If you’re unable to locate one of your employees to send their W-2 form, there are a few steps you can take:
- Check your records: Check your employee records, including their current and past addresses, telephone numbers, and email addresses. Ensure all the contact information on file is accurate and up to date.
- Reach out to the employee: Try to contact the employee using the contact information on file. You can call or email them to ask for their current mailing address, or to see if they can provide a new email address.
- Utilize the last known address: If you’re unable to contact the employee, the W-2 form should be sent to their last known address. Sending the form to this address will be considered a good-faith effort to reach the employee.
- File form 8809: If after a good faith effort, you are still unable to locate the employee, you may be able to file a Form 8809, Application for Extension of Time to File Information Returns. This form requests an extension of time for providing W-2 forms to the employees.
- Keep a record of your efforts: Regardless of the outcome, it’s essential to document your efforts to locate the employee. Include the date and method of your attempts to contact the employee and any responses you received. This will be required in case of an audit.
- Notify the employee: While not legally required, it’s good practice to notify the employee in writing that the W-2 was sent to their last known address.
A Returned W-2 Form: Stay Compliant
While the IRS does not give specific instructions for handling undeliverable W-2s, you should make a reasonable effort to fulfill your W-2 responsibilities.
If you don’t, there are consequences for you and your employee. If the blame lies with you, your employee may not be able to file their tax return on time. This can cause unnecessary delays and additional stress for them.
You might damage your relationship and your reputation.
The last thing you need is a compliance audit.
So, if you're still worried about staying compliant, please reach out to a Connected Representative for more guidance.
Alternatively, if you want an easy reference guide specifically to help your small businesses run payroll more efficiently, we’ve got it. To see where the holes in your processes might be, check out the Connected Guide to Small Business Payroll, today!