Created on June 29, 2010 - 10:57pm

HISTORY:

As some of you may recall, prior to January 1978, employers filed their tax reports and wage reports with the IRS on a quarterly basis.  The quarterly FICA tax report forms used were forms 941, 942, and 943.  Attached to these forms were Schedule A’s showing the detailed amounts of wages for each employee by Social Security number.  These Schedule A forms were used by The U.S. Social Security Administration (SSA) to post wages quarterly to each worker’s earnings record.

Public Law 94-202 (Combined Old-Age Survivors and Disability Insurance Income Tax Reporting Amendments of 1975) enacted January 2, 1976, provided for annual, rather than quarterly, wage reporting.

Under the Combined Annual Wage Reporting process, employers continue to file Forms 941, 942, and 943 quarterly with the IRS, but no Schedule A forms are filed.  Instead, forms W-2 are filed by the employer as the annual wage report for his or her employees.  These reports, in the form of Copy A of the W-2’s and a copy of the employer transmittal Form W-3 (or in the form of electronic records of W-2 and W-3 data plus transmittal Form 6559), are filed with the SSA annually on or before the last day of February in the year following the wage reporting year.

PROPOSAL:

The President’s 2011 Budget proposes to restructure the Federal wage reporting process by reverting to quarterly wage reporting.  According to the budget, increasing the timeliness of wage reporting would

• enhance tax administration,
• improve program integrity for a range of programs, and
• facilitate implementation of automatic workplace pensions.

The Administration states that they will work with the States so that the overall reporting burden on employers is not increased.

IRS REACTION:

Shelley Dockstader, IRS Acting National Account Manager, Electronic Tax Administration, noted during a May 6 payroll industry conference call that this is only a proposed change to the current information reporting rules.  The IRS does not have any current plans to require quarterly W-2 reporting.

It is uncertain whether this change could occur without it being included as part of new legislation or regulations.

CONTACT:
Chris Munzke, CPA GMS
Equus Software
(303) 292-4200
CMunzke@equusoft.com
www.equusoft.com