Timely Tax Tips

Need help completing a W-2, W-3, 1099, or 1096 form?

Church Finance Today

Timely Tax Tips

Need help completing a W-2, W-3, 1099, or 1096 form?

The IRS operates a centralized call site to answer questions about reporting information on these forms. If you have any questions about completing these forms, call the IRS at 1 866-455-7438, Monday through Friday, 8:30 a.m. to 4:30 p.m. eastern time.

KEY POINT. The Social Security Administration (SSA) is urging employers to be sure that amounts reported on Form W-3 correspond to amounts reported on quarterly 941 forms. The SSA also has noted that the main reason that W-2 forms are rejected is the use of incorrect Social Security numbers. Churches can verify the accuracy of Social Security numbers of up to 5 employees by calling the SSA at 1-800-772-6270. If you have more than 5 employees, you will need to contact your nearest SSA office for assistance in verifying names and Social Security numbers.

Tip. The IRS has provided the following suggestions to reduce the discrepancies between amounts reported on Forms W-2, W-3, and Form 941: First, be sure the amounts on Form W-3 are the total amounts from Forms W-2. Second, reconcile Form W-3 with your four quarterly Forms 941 by comparing amounts reported for: (1) Income tax withholding (box 2); (2) Social Security and Medicare wages (boxes 3, 5, and 7); (3) Social Security and Medicare taxes (boxes 4 and 6). Amounts reported on Forms W-2, W-3, and 941 may not match for valid reasons. If they do not match, you should confirm that the reasons are valid.

Tip. What are the most common errors the IRS finds on W-2 forms? Using ink that is too faint; entries that are too small; adding dollar signs to dollar amounts (they are not required); and checking the “retirement plan” box when not applicable.

Retaining W-2 Forms

It is a good practice for employees to keep copies of all W-2 forms issued to them by their employer until they confirm that the earnings reported on their W-2s correspond to the earnings credited to them on the Social Security Statement that is automatically issued each year to all Americans aged 25 and over. One of the main purposes of the Social Security Statement is to encourage taxpayers to check the accuracy of Social Security records and to make corrections. If earnings reflected on an employee’s Social Security Statement are underreported, the easiest way to correct the record is for the employee to present a copy of his or her W-2 for the year in question to the nearest Social Security office. While proof of earnings is possible without a W-2 form, it is more difficult and time-consuming.

Tip. Encourage church employees to retain each W-2 form they receive until they confirm that the earnings reported on the form show up as earnings for the same year on their annual Social Security Statement. You also may want to include a similar notice to your members in your church bulletin or newsletter.

Updated W-4 Forms for Church Staff

If you have not done so already, be sure to check with all nonminister church employees to see if they need to file new W-4 forms with the church. The W-4 form is used by employees to report withholding allowances. This information will determine how much income tax the church withholds from the wages of a nonminister employee. The important point is this—W-4 forms often become obsolete because of changes in an employee’s circumstances, but the employee fails to submit a new form to the church. This can result in withholding that is significantly above or below the actual tax liability.

Here are some reasons why an employee’s W-4 may be inaccurate—the birth of a new child, a pay raise, a divorce, or significant medical expenses. These same considerations apply to ministers who have elected “voluntary withholding” of their taxes.

Tip. The tax cuts passed by Congress in recent years have reduced taxes for most Americans, and this is another reason why church employees should review their W-4 form.

This article first appeared in Church Finance Today, January 2009.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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