IRS updates W-2 and W-3 instructions for employers

 

The IRS recently updated its general instructions for employers completing finalized Forms W-2 and W-3 for the 2021 tax year. The instructions remind employers that the American Rescue Plan Act permits employers to increase the amount of dependent care benefits that may be excluded from employee income in 2021 from $5,000 to $10,500 (or $5,250 for employees who are married filing separately).

The updated instructions also remind employers that Box 4 of Form W-2c, Corrected Wage and Tax Statement (entering 2020 in Box c), must be used to report amounts of the employee portion of Social Security tax that were deferred in 2020 under Notice 2020-65 and withheld in 2021.

In addition, the instructions provide guidance for employers that utilized any of the COVID-19 tax relief for 2020 and there are discrepancies in reconciling Forms W-2 and W-3 with Forms 941, 941-SS, 943, 944, CT-1, and Schedule H (Form 1040, Household Employment Taxes).

 

 

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