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IRS Clarifies Form W-2 Reporting of Employee Social Security Tax Deferrals

BY: Jyme Mariani, Esq. | 11/05/20

The IRS has clarified how employers should complete Forms W-2, Wage and Tax Statement, if they deferred the employee share of social security tax in 2020 [IRS, Form W-2 Reporting of Employee Social Security Tax Deferred Under Notice 2020-65, 10-29-20]. In 2021, employers that chose to defer will then withhold the deferred amount from employees’ wages and compensation paid between January 1 and April 30 and make appropriate tax payments based on the withholding date.

Employee Social Security Tax Deferral in 2020

On August 28, the IRS released guidance on the employee social security tax deferral. IRS Notice 2020-65 allows employers to defer the withholding and payment of the employee share of social security tax on applicable wages paid between September 1 and December 31, 2020. The guidance was in response to a presidential memorandum.

Form W-2 Reporting

For the deferrals, employers should report total social security wages paid to an employee on Form W-2, including any wages for which the employer deferred withholding and payment of employee social security tax, in Box 3 and/or Box 7. Employers should not include in Box 4 any amount of deferred employee social security tax that was not withheld.

Employee social security tax deferred in 2020 withheld in 2021 and not reported on the 2020 Form W-2 should be reported in Box 4 on Form W-2c, Corrected Wage and Tax Statement. On Form W-2c, employers should enter tax year 2020 in Box c and adjust the amount previously reported in Box 4 of the Form W-2 to include the deferred amounts withheld in 2021.

Employers should file all Forms W-2c with the Social Security Administration, along with Form W-3c, Transmittal of Corrected Wage and Tax Statements, as soon as possible after they have finished withholding the deferred amounts.

To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!

Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Payroll Information Resources for the APA.