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).




Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.


More tax hot topics