Understanding Form W-3 Instructions


Emptech's founder, Jeff Aleixo


Jeffrey Aleixo

Form W-3 instructions, payroll tax compliance

Filing the appropriate tax forms is one of the most important tasks employers have at the beginning of each year. In addition to the annual reporting of employee wages and taxes on Form W-2, employers need to provide identifying information to the IRS at the same time. 

To do so, they have to file Form W-3 to report employee wages and tax withholdings to the Social Security Administration. While Form W-2 shows this information for just one employee, Form W-3 combines the numbers for all employees in one place.

What Is Form W-3?

Form W-3, the Transmittal of Wage and Tax Statements, is a summary of all the business’ employee wages and contributions for the previous year. As a Form W-2 accompanying document, Form W-3 shows the IRS the total amount paid to all employees, as well as the total federal income, Social Security, and Medicare taxes withheld from them. It also details the number of people employed and states the total number of Forms W-2 employers are filing.

Differences Between the Form W-3 and Form W-2

Forms W-3 and W-2 are similar given that they report much of the same information, and every employer who is required to file one or more Forms W-2 also has to file Form W-3.

The main difference between them is that Form W-2 reports information like total wages and taxes withheld for each employee. On the other hand, Form W-3 reports the total wages, taxable wages, and tax withheld for an employer.

Form W-2 is given to each employee, so they can use it for their income tax reporting, and it is filed with the SSA to verify the information given to the employee. Form W-3 is filed with the SSA only to show if all wages and all the necessary FICA (Federal Insurance Contributions Act) taxes were reported for the previous year.

Use this thorough guide to effectively manage tax responsibilities, remain compliant with changing regulations, and avoid tax errors resulting in fines.

Form W-3 Instructions

In order to fill out Form W-3, employers need the following information:

  • Business details, including federal employer identification number (FEIN), legal address, and other contact information;
  • Total wages, including salary, tips, commission, and other compensation, paid to employees over the prior year;
  • Total taxable wages for Social Security and Medicare;
  • Total income tax withheld, both federal and state;
  • Total Social Security tax withheld;
  • Total Medicare tax withheld;

There are both lettered and numbered boxes on Form W-3. The lettered boxes help the SSA identify a business, and include:

  • Box A: Control Number,
  • Box B: Kind of Payer and Kind of Employer,
  • Box C: Total Number of Forms W-2,
  • Box D: Establishment Number,
  • Box E: Employer Identification Number,
  • Box F: Employer’s Name,
  • Box G: Employer’s Address and Zip Code, and
  • Box H: Other EIN Used this Year.

In boxes 1 through 19, employers enter the combined income and tax information from all the Forms W-2 included in Form W-3 filing, including:

  • Box 1: Wages, tips, other compensation,
  • Box 2: Federal income tax withheld,
  • Box 3: Social Security wages,
  • Box 4: Social Security tax withheld,
  • Box 5: Medicare wages and tips,
  • Box 6: Medicare tax withheld,
  • Box 7: Social Security tips,
  • Box 8: Allocated tips,
  • Box 9: Blank,
  • Box 10: Dependent care benefits,
  • Box 11: Nonqualified plans,
  • Box 12a. Deferred compensation,
  • Box 12b. Blank,
  • Box 13: Nonqualified plans,
  • Box 14: Income tax withheld by the payer of third-party sick pay,
  • Box 15: State and employer’s state ID number,
  • Box 16: State wages, tips, etc,
  • Box 17: State income tax,
  • Box 18: Local wages, tips, etc, and
  • Box 19: Local income tax.

The final part of the Form W-3 requires employers to provide information, such as:

  • Employer’s contact person,
  • Employer’s telephone number,
  • Employer’s fax number, and
  • Employer’s email address.
Get a detailed overview of 2021 Form W-2 reporting requirements of qualified sick and family leave wages paid under the Families First Coronavirus Response Act (FFCRA) as amended by the American Rescue Plan Act of 2021 (ARPA).

Timely Filing of Form W-3

The IRS and SSA require employers to fill out and submit Form W-3 once each year and the annual deadline for filing this form along with all corresponding Forms W-2 is January 31. Therefore, employers should have Forms W-2 prepared and sent to employees by or before the deadline, and send Copy A of each Form W-2 together with the Form W-3 on or before January 31.

Both Forms W-2 and W-3 can be filed electronically or by mail. For businesses that want to file manually, copies of Form W-3 are available through the IRS website, and to file Forms W-2 and W-3 electronically, employers need to register for the Social Security Administration’s Business Services Online (BSO) platform. For businesses filing more than 250 Forms W-2, the IRS requires the forms to be submitted electronically unless they have provided the employer a written waiver.

In case employers make mistakes on one of the employees’ Forms W-2 or on the Form W-3, they can file forms W-2c and W-3c to make corrections. There is no deadline for these correction forms, but the IRS requests corrections to be filed as soon as possible after an error is discovered. Employers also have to give any affected employees a copy of their Form W-2c.

Managing Tax Responsibilities

To avoid penalties and ensure compliance with tax regulations, employers need to understand their obligations when it comes to filling out the proper paperwork and sending it at the right time. Form W-3 may seem challenging, but it closely corresponds to Form W-2, with sections 1 through 11 duplicating the necessary data, like wages, tips, and other compensation. Furthermore, for companies that need more assistance, the SSA has a checklist that can help employers complete and file their Forms W-2 and W-3.

It is absolutely critical for every employer to understand your obligations thoroughly and ensure their current business processes and controls are tax compliant. This is especially important in light of the new legislation introduced to offer stimulus and support to individuals and businesses during the pandemic. While new regulations are created to help avoid permanent damage to the economy, they also raise additional compliance requirements for employers.

However, streamlining payroll tax processing allows employers to avoid risk, stay compliant, and grow their business at the same time. Such an approach simplifies the entire process and eliminates the burden of calculating, preparing, and making payroll tax payments. As a result, employers can avoid tax complexities and make sure that their payroll is processed accurately while staying in line with the current requirements.

Use a comprehensive software solution to ensure payroll tax processing is regulatory compliant, automated, efficient, and error-free.
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