Common Employer Social Security Reporting Errors

SSA and IRS maintain employer records by EIN. Reports received with erroneous EINs may be credited to the wrong record.11 min read updated on February 01, 2023

GENERAL

* INCORRECT OR MISSING EMPLOYER IDENTIFICATION NUMBER (EIN)

SSA and IRS maintain employer records by EIN. Reports received with erroneous EINs may be credited to the wrong record. Either missing or incorrect EINs may result in IRS assessing penalties for failure to file correct reports. Valid EINs must have nine digits displayed in this format: XX-XXXXXXX.

Some of these errors occur because the employer fails to use the IRS and SSA mailing labels provided. IRS provides mailing labels with Publication 393, "Federal Employment Tax Forms", which are to be used to identify paper W-2 reports for SSA processing. You should ensure that the EIN shown on paper Forms W-2 is correct and is identical to the EIN shown on transmittal Form W-3. SSA includes mailing labels in TIB-4 for use in identifying magnetic media reports. When the labels are not used and EINs are transcribed from other sources, errors may occur.

* INCORRECT EMPLOYEE NAMES AND SOCIAL SECURITY NUMBERS (SSNS)

SSA cannot credit earnings to employee records unless the employee name and Social Security number on the wage report matches the name and number in SSA's files. (See page 9 for tips on ensuring accurate SSNs are recorded.)

* WAGE REPORTS FOR YEARS AFTER EMPLOYEE'S DEATH

For Social Security and Medicare reporting, payments on behalf of a deceased employee made after the year the employee died cannot be credited as wages for Social Security purposes. Such payments should be reported for the beneficiary or estate of the deceased employee on Form 1099-MISC, "Miscellaneous Income", box 3, Other Income.

* INCORRECT USE OF EMPLOYMENT TYPES

Some Employer reports include types of Form W-2 that disagree with the type of employment identified on the Form W-3 (e.g., Medicare only W-2s included with regular Social Security W-2 wage reports). Undetected, these situations may cause incorrect wage postings.

* USE OF TITLES AND ABBREVIATIONS IN NAME FIELDS

The name fields of wage reports should not include any titles (Mr., Mrs., Dr., etc.) or abbreviations to designate the employee's position, title, company/division, etc. These types of entries in the employee name fields will prevent SSA from electronically identifying the employee for whom the wages are reported.

* ERRORS RESULTING IN OUT-OF-BALANCE REPORTS

Use of maximum Social Security wage amount for a prior year--instead of for the tax year being reported.
Use of maximum Social Security wage amount for Medicare wages--even though there is no Medicare wage maximum so that all Medicare wages are taxable.
Decimal mistakes in money fields; i.e. "4800" which may be processed by SSA as $48.00 instead of "4800.00." Always show both dollars and cents even if cents are .00.
Tips included in the Social Security wage field as well as in the Social Security tip field (these two fields are added together by SSA to obtain total Social Security earnings).
Omitted wage or tax fields on wage reports.

* FAILURE TO NOTIFY SSA OF BACK PAY AWARDS UNDER A STATUTE

Back pay is normally treated as regular wages by both IRS and SSA. However, special rules apply to backpay awarded under a statute.

Back pay awarded under a statute is a payment by an employer pursuant to an award, determination or agreement approved by a court or government agency. IRS treats back pay under a statute as wages in the year the award is paid for taxation purposes. SSA treats back pay under a statute as wages for past periods. Accordingly, SSA allocates the wages to the individual's earnings record for the period(s) it should have been paid.

For details on reporting back pay awards under a statute, see IRS Pub. 957, "Reporting Back Pay Awards to the Social Security Administration".

Errors Common to Paper Form W-2 Reports

* PRIOR TAX YEAR FORM USED--E.G. 1993 FORM USED FOR 1994 WAGES

SSA optical scanning and imaging systems are modified annually to meet year to year changes in Form W-2 formats. It is essential that the W-2 form for the proper tax year be used.

* FAILURE TO FILE COPY A OF FORM W-2 WITH SSA

Copy A of Form W-2 is processed by SSA on optical scanning and imaging equipment. When a copy other than "A" is filed, or when the form does not meet the required specifications, it is more costly to process and more likely to be processed incorrectly.

* FAILURE TO FILE COPY A OF W-2 AND W-3 WITH SSA

Some paper reports are filed with IRS; some are not filed at all. Send all paper Forms W-2 (Copy A) and W-3 directly to SSA at the following address: Social Security Administration Data Operations Center Wilkes-Barre, PA. 18769

* "VOID" INDICATOR ON FORM W-2 CHECKED IN ERROR

SSA will not credit wages shown on any Form W-2 that is void.

* FAILURE TO COMPLETE THE "PENSION PLAN" BLOCK IN BOX 15 OF FORM W-2

The "Pension Plan" block on Form W-2 must be checked when the worker is an active participant in a retirement plan or a simplified employee pension plan you maintain. Failure to make an entry when required can lead to income tax problems with IRS for the worker. See IRS Publication 1602, General Rules for Individual Retirement Arrangements Under the Tax Reform Act of 1986, for information on this subject.

* FAILURE TO USE W-2 FORMS THAT MEET IRS SPECIFICATIONS

IRS Publication 1141 provides specifications and rules for private printing of substitute Forms W-2 and W-3. Common errors include improper paper weight, margins, formats and forms not printed in scannable (red) ink. Failure to file properly can subject the filer to penalties.

* INCORRECT OR OMITTED MEDICARE WAGES/TIPS

Medicare wages/tips must be reported separately in addition to any Social Security wages and tips. There is no limit to the wages/tips subject to medicare, so all such earnings must be shown on Form W-2/W-3 wage reports.

Errors Common To Magnetic Media Filers

* FAILURE TO FILE FORM 6559, "TRANSMITTER REPORT AND SUMMARY OF MAGNETIC MEDIA", WITH EACH MAGNETIC MEDIA REPORT

Form 6559--or a facsimile of the form--helps SSA identify the employer (or transmitter), the type of report, and the year being reported prior to scheduling the report for processing. Filers making more than one submittal should provide a copy of Form 6559 for each submittal.

* DOLLAR TOTALS ("T" RECORD) OMITTED ON REPORT

Dollar totals are used by SSA to determine if the report is in balance and, if not, show where the error may be found and corrected.

* MISSING/INCORRECT TRANSMITTER IDENTITY ("A" RECORD) OR BASIC AUTHORIZATION ("B" RECORD)

This information helps SSA properly identify and control each report. In addition, the "B" Record identifies what kind of equipment was used to prepare the report which helps in resolving possible processing problems. This record also provides employer address information that SSA uses for mailing reporting instructions and for returning unprocessable reports for correction.

* EMPLOYEE NAME ENTRIES INCONSISTENT WITH NAME CODE IN EMPLOYER ("E") RECORD

The order in which employee surnames and given names are shown in the report must agree with the name code: "F" if the given name is shown first and, "S" for surname, if first, in the name field of the "E" record. This will ensure the employee names match SSA records.

* "UNREADABLE" REPORTS

Reports must meet the requirements set out in SSA's Technical Instruction Bulletin No. 4 (TIB-4) to be processable on SSA's electronic equipment. Unprocessable reports will be returned to the transmitter for correction and timely return to SSA. Failure to return the correction reports timely may result in IRS penalty assessment.

* SUBMITTER USE OF INCORRECT TAX YEAR

Reports must show the correct tax year and reported wages must reflect the Social Security wage maximum appropriate for that year.

Errors Common To Form 941/942/943 Filers

* INCORRECT OR OMITTED MEDICARE WAGE/TIP AMOUNTS

Medicare wages/tips must be shown separately from Social Security wages and tips on Forms 941 filed with IRS.

* INCORRECT OR OMITTED THIRD PARTY SICK PAY

See the discussion on third party sick pay--page 10.

* SHOWING NON-COVERED AMOUNTS AS SOCIAL SECURITY/MEDICARE WAGES

Examples of non-covered amounts are:

Employee earnings that exceed the yearly taxable amount for Social Security wages.
Payments to independent contractor shown as wages.

See IRS Publication 15 (Circular E) for other noncovered wages under the heading "Special Rules for Various Types of Services and Products"

* FAILURE TO FILE FORMS W-3C AND W-2C WITH SSA WHEN ADJUSTING PRIOR YEAR EARNINGS ON FORM 941 OR FORM 843

Adjustments of tax liability filed with IRS which are based upon changes in Social Security/Medicare wages should be matched by the filing of wage adjustment Forms W-3c and W-2c with SSA to enter the wage changes on employees' records. See page 23 for more information on correcting reporting errors.

* FILING OF DUPLICATE OR PARTIALLY DUPLICATE FORM 941S

Social Security/Medicare wages shown on duplicate 941s--or partially duplicate 941s (e.g., 1 month's wages are reported on two different quarterly reports)--may lead to unnecessary and costly reconciliation activity between SSA, IRS, and the employer.

HOW TO AVOID ERRORS

* EMPLOYERS WITH COMPUTER-BASED PAYROLL SYSTEMS WHO PREPARE PAPER W-2 REPORTS SHOULD REQUEST SSA PUBLICATION NO. 31-011, "SOFTWARE STANDARDS AND EDITS FOR ANNUAL WAGE REPORTING"

This publication covers software standards and edit criteria for those who use computer systems to produce paper Form W-2 reports. Requests for the publication should be sent to:

Social Security Administration

Office of Financial Policy and Operations

Attention: AWR Software Standards Project

P.O. Box 17195

Baltimore, MD 21235

or call Regional Wage Reporting Specialists serving your area.

* MAGNETIC MEDIA FILERS SHOULD STRICTLY FOLLOW THE GUIDELINES PROVIDED IN SSA PUBLICATION 42-007 (TIB-4) "MAGNETIC MEDIA REPORTING"

Requests for this publication should be sent to the SSA Regional Wage Reporting Specialist serving your State--see the listing provided on page 26.

* PAPER FORM W-2 FILERS SHOULD REFER TO THE FORM W-3 AND FORM W-2 "REMINDER" SHEETS PROVIDED IN THE FOLLOWING PAGES

* REFER TO THE MATERIAL ENTITLED "WHERE TO FIND HELP ON WAGE REPORTING QUESTIONS"--PAGE 24

* ADVISE EMPLOYEES TO NOTIFY SSA OF ANY CHANGE IN NAME TO ENSURE WAGE REPORTS ARE PROPERLY CREDITED TO THEIR RECORDS

* CAREFULLY REVIEW THE NEW FILING INSTRUCTIONS ISSUED EACH YEAR BY IRS (PUBLICATION 393) AND SSA (TECHNICAL INSTRUCTION BULLETIN NO. 4) TIB-4

* BE CAREFUL PREPARING W-2 REPORTS WHEN YOUR RETURN INCLUDES REPORTS EXEMPT FROM SOCIAL SECURITY TAXES

If you prepare W-2s for individuals who are exempt from Social Security taxes as well as W-2s for individuals covered by Social Security, special care should be taken. It is important in this case to ensure no Social Security wage entry is made on W-2s for exempt individuals. For a listing of the types of employees exempt from Social Security taxes, see "Special Rules for Various Types of Services and Products" in IRS' Publication 15 (Circular E), "Employer's Tax Guide."

* RECONCILE FORM 941 REPORTS TO FORM W-3 FOR THE YEAR BEFORE FILING YOUR WAGE REPORT WITH SSA

To help you identify and resolve errors in your records which could lead to the filing of erroneous reports with IRS and SSA, you may wish to balance cumulative Forms 941 to the W-2 information in your records at the end of each quarter. In addition, we have prepared the following two worksheets that may be helpful.

One is intended for use in preparing your fourth quarter Form 941, due the end of January of the next year--or, if all taxes were deposited, not due until 10 working days from the end of January. At this time, your copies of previously filed Forms 941 for the year (the first three calendar quarters) should be reviewed along with the payroll records for the year. Any over or under reporting of income or wages can then be identified and any overpayment or underpayment of taxes can be adjusted for on the fourth quarter Form 941.
The other worksheet is intended for use when preparing your summary income and wage reports for the year that will be filed with SSA--Form W-3 for paper report filers, and Form 6559 for magnetic media filers.

Worksheet For Form W-3

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| ________________ * MATCH * __________________ |

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| ________________ * MATCH * __________________ |

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_______________________________________________________________

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| | | | |

| ______________ * MATCH * ___________________ |

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_______________________________________________________________

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| ______________ * MATCH * ___________________ |

| | | | |

________________________________________________________________

* Annual amounts from payroll records should match the total amounts reported on all Form 941s for the year; the total amounts reported on all Form 941s for the year should match the sum of the same data fields which is shown in the W-3 totals. If these amounts do not match, records should be rechecked to identify what adjustments are needed. (Note: Errors identified on prior Form 941 returns for total wages, tips, and other compensation cannot be adjusted and need not match the Form W-3.)

**Adjustments may be needed to balance totals because of:

Corrections to the 4th quarter Form 941 that became apparent only after that form had been filed
End-of-year bonus, award, etc. not included in last Form 941
Adjusted amounts for a prior year were reported on current year Forms 941 and in error included in current year totals
Taxable fringe benefits for November and December that will be treated as received in the following year but were shown as current year payments in error
Amounts reported on previous Forms 941 as wages are, in fact, employer payments to an independent contractor.

Worksheet For Fourth Quarter Form 941

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| |1-3) | | |

|_______________________________________________________________

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|_______________________________________________________________

|_______________________________________________________________

|_______________________________________________________________

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________________________________________________________________

CORRECTING REPORTING ERRORS

Correcting Form W-2 Errors Before Filing

You may become aware of the need to make corrections to W-2 information after providing an employee with his or her copies of the W-2 but before the W-2 data has been filed with SSA.

If the only correction needed is for State or local government information, your State or local government regulations may require that you file correction returns with them. However, no change in W-2 data is needed for SSA--but the employee should be given corrected W-2 copies with "Reissued Statement" shown at the top.
If other corrections are needed, the W-2 data must be corrected before filing with SSA and a reissued statement given to the employee.

Correcting Form W-2 Errors After Filing

Once W-2 information has been filed with SSA, any necessary corrections must be made on prescribed Forms W-2c, "Statement of Corrected Income and Tax Amounts", and W-3c, "Transmittal of Corrected Income and Tax Statements." These forms can be obtained from IRS by calling 1-800-829-3676.

If the only correction needed is to the employee name or Social Security number, file only a W-2c. If the employee has had a name change, the employee should notify SSA and request a new Social Security card.
If other correction is needed, file Forms W-2c and W-3c. Form W-2c reports may also be filed on magnetic media -- contact the regional wage reporting specialist for your State (see page 26). A copy of the Form W-2c should be furnished to the employee.

Correcting Amounts Reported On Form 941

Amounts reported to IRS on Form 941, "Employer's Quarterly Federal Tax Return" can be corrected by showing adjusted amounts on the Form 941 for the quarter during which the error was discovered with a Form 941c, "Supporting Statement to Correction Information".

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excerpted from 1995 Social Security Admin. material

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