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What is a W3 Form and How to File it for Your Business?

What is a W3 Form and How to File it for Your Business? 1

Most small businesses are well acquainted with Form W2 or Form W4, but what about Form W3? 

Sounds alien, right?

Fortunately, if you are familiar with Form W2, Form W3 may seem like a piece of cake. That being said, a responsible taxpayer needs to have a strong understanding of liabilities. And the moment you hire your first employee, you are liable to file the W3 form. 

So, whether you form an LLC in Texas or open a store in California, here’s everything you need to know about the W3 form.

What is a W3 Form?

Transmittal of Wage and Tax Statement, or Form W3, is an addendum to the W2 form. In fact, it is a summary of Form W2 and summarizes your employee’s information, such as:

  • Total earnings, including wages, tips, monetary compensations, allocated tips, etc.
  • Federal and state income tax withheld.
  • Medicare tax and social security tax withheld.
  • Deferred compensation.
  • Dependent care benefits.
  • Nonqualified plans.
  • Employer identification number and business contact details.
  • Number of employees and number of W2 forms filed.

Given its aggregated nature, the W3 form helps verify and validate the accuracy of the Form W2 details. It also grants a formal reconciliation of the quarterly taxes paid for the year.

How is Form W3 Different from Form W2?

Forms W2 and W3 are often confused due to their similar natures. However, they are not the same, the key differences being:

  • For a start, employees file Form W2, while employers file Form W3 (along with the W2 form).
  • Employees need to file the W2 form with the Social Security Administration (SSA), employer, and local tax department. On the other hand, form W3 is filed by the employer with the SSA.
  • Since the W2 form goes to various sources, employees may be submitting multiple copies. The employer files a single copy of the W3 form even while filing for multiple employees.
  • Form W2 is specific to an employee, and Form W3 is specific to a business.

Who Needs to File a W3 Form?

If your business is required to file one or more Form W2, you are also liable to file Form W3 with the SSA. In other words, if you:

  • Withhold any income, tax, social security, or Medicare wages; or
  • Pay $600 or more in wages (even if you do not withhold anything)

Then you have to file forms W2 and W3.

How to File a W3 Form?

The W2 and W3 forms can be filed online or by mail. You can even have a tax assistant file them for you. These have been discussed as below:

Filing Online

To file the W2 and W3 forms electronically, you will have to register on the Business Services Online (BSO) platform hosted by the SSA. Once you log in, the BSO will automatically pre-fill Form W3 based on the W2 form data. Electronic filing of the W2 and W3 forms is mandatory if you are filing for 250+ employees. Depending on the number of employees and the resources available, you have two options:

  1. You can choose to file the W3 form manually (ideal for less than 50 employees) after vetting the information auto-populated in the W3 forms.
  2. Alternatively, you can also file the W3 form using payroll or tax software that you may be using otherwise to file digital tax. This route works if you have more than 50 employees in your business. However, remember that the files you upload through the payroll or tax software must comply with the SSA guidelines.

The fact that e-filing is faster, secure, and more accurate tips the scale in its favor.

Filing by Mail

Even though the SSA has made provisions for the e-filing of W2 and W3 forms, small businesses can file by mailing in the forms. Note that in this case, you will have to order the paper copies of both forms from the IRS, as these cannot be downloaded and printed from the official website entirely, as Copy A of the form is printed in special red ink.

Once you have entered your details, you can send the forms to the address given here (under the “Where to file paper Forms W-2 and W-3” section).

Filing through an Accountant

If you are not the DIY kind or are just finding taxes confusing, you can hire a professional for the task. An accountant can calculate any outstanding payment or deposit and file the forms on your behalf.

When Should You File the W3 Form?

The IRS and SSA consider the annual filing of Form W3; hence, you will have to file it once every year.

The annual deadline for filing Form W3, along with Form W2, is the 31st of January.

Final Thoughts

To summarize, even though filling out the details in Form W3 may appear overwhelming, they are simply the addition of all the details contained in the W2 form. In a way, it duplicates and validates the data entered in form W2 and corroborates information from the employer and employee’s end.

Fortunately, there are a ton of resources made available by the SSA (through its checklist) and the IRS (through its video) to make this process as easy as possible. So, stay ahead of your tax liabilities!

Author Bio:

Matt Horwitz

Matt Horwitz is the founder of LLC University, a website that teaches people how to form LLCs. Matt is the leading authority in LLC education and is featured in CNBC, Yahoo Finance, Entrepreneur Magazine, and US Chamber of Commerce. Matt holds a Bachelor’s Degree in business from Drexel University with a concentration in business law. LLC University®, established in 2010, was the first company to create free LLC courses in all 50 states.

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