Form W-2 Penalties for Employers: How to Avoid Them in 2025

W-2 (Wage and Tax Statement) is an important IRS tax form for employers that hire and pay employees on payroll. It reports the taxes withheld for each employee from their paycheck.

However, filing the incorrect W-2 forms can have serious consequences. These mistakes can lead to penalties as high as $660 per form.

Mind it; these penalties can add up fast.

Along with filing the W-2 form, it is important that you file it correctly and submit it before the deadline.

What are the most common W-2 form mistakes? How to avoid these mistakes? How much penalty can each mistake incur?

Read this post as we discuss the W-2 penalties for employers and how to get out of the hot water of penalties.

Who needs to file Form W-2 with the SSA?

A ‘payer’ of Form W-2 is the employer of any business, non-profit organization, or government agency that pays wages to its employees. A payer is responsible for filing the W-2 form and reporting the wages and withheld taxes for each employee.

More broadly, a payer can be owner of:

• Small businesses with part-time or full-time staff
• Corporations, LLCs, partnerships
• Nonprofit organizations and
• Government agencies

Even if the third-party handles the payroll, it is the responsibility of payer to file a W-2 form. While the third-party payroll individual manages payroll and deductions, payer must deal with compliance regulations.

Why it’s Important to File W-2 Correctly

Correct W-2 forms are the foundation of accurate tax reporting for both the employees and the SSA/IRS. Apart from the hefty penalties, there are several other reasons why you need to file the W2s correctly.

• Employee tax reporting: Employees use information from W2 to file their personal tax returns and claim refund. Incorrect or missed filing can lead to delays in their returns and refunds.
• IRS compliance: After submitting the W-2 with SSA, IRS checks and validates that the employee payroll data matches with tax returns. Discrepancies in data can flag IRS audits and trigger penalties.
• State reporting requirements: Many states require W2s to be filled within their state for the state tax. Incorrect filing can incur penalties from both state and federal departments.

What is the penalty for employers for not sending W-2 form?

IRS imposes a penalty on employers ranging from $60 to $660 per form. The W-2 late filing penalty depends on the delay period and the size of the business.

So, if you file 15 W2s after 45 days from the deadline, you can face penalty as given: 15 * $120 = $1,800.

Note: These penalties apply separately to SSA and copies submitted to employees. Thus, incorrect filing can incur a double penalty on a single form.

Common mistakes that can lead to W2 penalties

Even if you file the W2s with the right intention, you’d still be liable to pay a fine if it is incorrectly filed or missed. That said, there are a few common mistakes that you can look for when filing a W-2.

• Filing after the deadline: The deadline for filing W2 form is January 31. You must submit the form with SSA and employees by this date to avoid penalties.
• Wrong employee information: Incorrect employee name, wrong SSNs or address can trigger fines.
• Filing for wrong tax year: Employers can mistakenly file for outdated or future tax year that can confuse IRS and employees.
• Not providing recipient copies to employees: IRS also requires the payers to send a copy of W2 to the employees by January 31st. Failing to do so can result in similar penalties as misfiling.
• Not filing electronically when required: If you’re filing more than 10 returns (W2s, 1099s, etc.), you need to file it electronically. Mailing these forms can lead to penalties from IRS.

How to fix W-2 errors?

If you file a W2 form incorrectly, you can fix these errors by filling out the form W-2c (Corrected Wage and Tax Statement).

A Form W-2c is used for making corrections to W-2 forms for the current or previous year. Even if there is one error or multiple errors, W-2c reports these errors and fixes your records.

Along with a W-2c, you also need to fill a W-3c form (Transmittal of Corrected Wage and Tax Statement). However, W-3c is only mandatory for paper filing.

Once you’ve filled the form, send the corrected version to SSA and share a copy with your employee. To reduce the penalty, make sure to submit the corrected W-2c form within the 30 days of filing a W-2 form.

How to avoid W-2 penalties?

Last minute W-2 filing are more vulnerable to errors. Hence, you should always be mindful to file early and correctly. Here are the best practices to avoid potential W-2 penalties:

Start early

You shouldn’t wait for January to file your W-2. Instead, create a pre-filing checklist and collect the data in December to avoid last minute rush.

This gives the payer enough time to:

• Review payroll records for accuracy.
• Verify that all compensation (wages, bonuses, taxable benefits) is included.
• Update employee addresses and contact details.

Collect and validate TINs

Employers should also collect the TIN number from each employee to make sure that they’re filing W2 for the correct employee. A mismatch in TIN can trigger penalties.

Use the IRS TIN matching system to match the employee name with Social Security number (SSN). Additionally, a W-4 form helps determine the tax withheld and validate it with the information filled in form W-2.

Use e-filing when required

E-filing is a more viable option for filing tax returns. And, when there are more than ten returns (W2s, 1099, etc.) to file, IRS mandates filing W-2 online for employees.

Sending your forms via mail can delay the delivery or even misplace them. Thus, it is always a good idea to e-file even if it is below threshold.

e-Filing your returns offers several advantages:

• Faster submission and confirmation of receipt.
• Lower risk of losing forms in the mail.
• Built-in error checking in most e-filing platforms.

Send employee copies by January 31

IRS has set the deadline for W2 filing as January 31. Thus, the payer should file every W2 return before January 31 with SSA (Social Security Administration) and send a copy of it to the employees within that timeframe.

The deadlines are strict and there are no extensions, unless there is a public holiday. If employees don’t receive their forms on time, they may fail to file their tax returns.

Even in this case, the employer is liable for the penalty.

Use a trusted e-filing platform

Manual filing can often cause errors and incorrect tax returns. An automated filing system like Tax1099 helps automate every process in filing tax returns.

It allows businesses and accountants to file various return types (Wage forms, 1099 forms and payroll forms) without hassle. You can also schedule e-filing and get an automated pre-filing checklist for a seamless process.

Using Tax1099, you can set the internal reminders for key dates and assign one team member to monitor your compliances.

Frequently Asked Questions

1. What is the W-2 deadline for 2025?

The deadline for filing a 2025 W-2 form with SSA and sending the employee copy is January 31, 2026. You can request a 30-day extension by filling the Form 8809 with SSA.

2: Can I fix W-2 errors after filing?

Yes. You can fix the W-2 form errors by filling the Form W-2c and submitting it with SSA and employee.

3: What if the employee doesn’t give a correct SSN?

If the employee doesn’t give a correct SSN, the employer can request a correct one. If an employee provides an incorrect SSN, request the correct one. Employers must document requests, and if unresolved, the issue should be reported to the IRS.

4: Do I still file if payroll is outsourced?

Yes, you should file the returns even if you outsource payroll. In case of missed filing, the IRS holds employer responsible and liable for charges.

5: Can I be fined if I filed on time but made a small mistake?

Yes, you’ll still be fined even if you make a small error. However, the fine can be reduced or waived if you submit the corrected form quickly after original W-2 filing.

Closing Thoughts

Now, you know the importance of filing the W-2 form correctly and timely. Even a small mistake can land your business into financial trouble as well as legal mishaps.

An automated filing system like Tax1099 help automate your tax returns so that you do not miss any returns. You can set up an internal reminder for each of your returns and get assistance with filing.

Even if you submit the W2 form, you can use Tax1099 to verify the details and ensure that it is free from errors.

Sign up today and take control of your year-end filing process now.