Tax Statement Corrections to a W-2

Background

An operating location may discover incorrect information on a tax statement that already has been issued and reported to the Social Security Administration (SSA) and the Internal Revenue Service (IRS). A previously issued tax statement must be corrected and reported if it is determined that the information is incorrect. A new tax statement must be created and reported if it is determined that a statement was not issued when required. All corrections to tax statements, as well as the creation of statements that were never produced, are made at central office.

For more general information about types of tax statements, undeliverable statements, and the copies of statements, refer to the document Tax Statements on the Research Foundation's (RF) Web site.

Necessity for W-2 Corrections

A W-2 Wage and Tax Statement can be corrected only by central office completing a W-2C Corrected Wage and Tax Statement, which then is reported to the IRS and SSA.

The following table describes some of the common reasons central office may issue a W-2C:

W-2 Error

Corrected Form and/or Communication to Taxpayer

Reason for Correction

Possible Reason(s) for the Error

Incorrect Employee Name and/or Social Security Number (SSN)

W-2c

Letter of explanation and W-2c copy to taxpayer

SSA cannot credit earnings to employee records unless the employee's name and Social Security number on the wage report matches the name and number in SSA's files. Earnings are used in calculating future Social Security (SS) benefits.

Pseudo SSN was never changed, or system input error

Wages, tips, other compensation amount is incorrect because of an overpayment and the Social Security and Medicare wage and tax amount is affected

W-2c

Letter of explanation and W-2c copy to taxpayer

 

Salary and wages paid in error remain taxable to the employee for that year. This is because the employee received and had use of those funds during that year. The employee is not entitled to file an amended return (Form 1040X) to recover the income tax on these wages. Instead, the employee is entitled to a deduction or credit for any repaid wages on his or her income tax return for the year of repayment.

A person received an overpayment and then returned the overpayment to the RF.

 

Wages, tips, other compensation amount is incorrect because of an overpayment and the Social Security and Medicare wage and tax amount is not affected

Not Corrected

Letter of explanation to taxpayer

 

Wages, tips, other compensation amount is incorrect because of an overstatement

W-2c

Letter of explanation and W-2c copy to taxpayer

 

Unnegotiated payments are classified as administrative errors with the SSA and IRS and all associated wages (i.e., income, Social Security, and Medicare amounts) and taxes are adjusted.

A person never receives a payment (e.g., a check or direct deposit funds are returned to the Research Foundation).

Social Security and Medicare wage and tax amount is incorrect

W-2c

 

Letter of explanation and W-2c copy to taxpayer

 

The RF is required to correct known errors in Social Security and Medicare wages and tax.

Certain noncitizens and students can be SS and Medicare tax exempt. These taxes can be withheld and reported in error.

Incorrect amount of federal income tax withheld

Not corrected

If the W-2 reported the actual amount withheld, whether correct or not, adjustments will be made when the taxpayer files a personal income tax return.

System or input error.

Incorrect address and zip code of taxpayer

Not corrected

The RF is not required to report address changes to the IRS or SSA.

People file not updated. Note: The employee is responsible for informing the RF of address changes.

A statement was never created

W-2

Letter of explanation and W-2 copy to taxpayer

The RF is required to report payments of wages and miscellaneous income.

Incorrect payment classification (e.g., person paid as an independent contractor but is really an employee) or system input error.

A statement was created but shouldn't have been created

W-2c

Letter of explanation and W-2c copy to taxpayer

The RF is required to report payments of wages and miscellaneous income.

Incorrect payment classification (i.e., relationship with the RF was misclassified). or system input error.

The Social Security and Medicare wage and tax amount includes withholding on a Worker Compensation settlement

W-2c

Letter of explanation and W-2c copy to taxpayer

Social Security and Medicare taxes are not applicable to settlement amounts. The tax amount withheld must be corrected.

Some Worker Compensation settlements cross calendar years.

W-2 Correction Procedure

Correcting tax statements is a manual process that requires full documentation. Most W-2 form correction requests will be accompanied by a "Payroll Check Corrections Form" or "Payroll Balance Adjustment Form." The following procedure should be used when operating locations need to request a correction to a person's previously issued W-2:

Step

Who Does It

Action

How is it Done?

1

Operating Location

Request to central office corporate payroll office to correct a W-2 reporting error.

Special Note About Nonresident Alien (NRA) Employees

In some cases, a NRA employee may receive a W-2 and 1042-S tax statement, both of which could require correction. Before making a correction request, operating locations should thoroughly research which tax statements a NRA employee received.

Generally, the Payroll Balance Adjustment Form is used to correct an overpayment or underpayment to the taxpayer and the Payroll Check Correction Form is used to return non-negotiated payment. Other requests (e.g., name or SSN change) will take the form of an email or FAX. All requests must be in writing with a detailed description of the circumstances.

Request

The request should include the information necessary for central office to correct the original tax statement, such as the person's name and work location (including location code), SSN, tax year requested, and the person's current mailing address.

Description

The description must be sufficient to verify that it is appropriate to issue a corrected tax statement. The description should provide how the payment was originally reported and how it should be corrected. For example, if a series of transactions was processed improperly, the details of the transactions that resulted in the error should be provided. Payment documentation supporting the corrections should also be provided, when applicable.

2

Central Office

Review request.

RF corporate payroll reviews the details of the circumstance and makes a determination if a correction or a new tax statement should be created.

3

 

Central Office

 

No tax statement correction is warranted

Notify operating locations and end this procedure.

A tax statement correction or a new tax statement is warranted

Create W-2c forms for corrections. Create W-2 forms for statements never created. Create other types of tax statements as the situation warrants.

4

Central Office

Make system changes

Process adjustments to project, task, award, expenditure type, and organization (PTAEO) distributions

5

Operating Location

Make system changes

Depending on the situation, make any of these changes in Oracle:

  • change a person's record in order
    to correct any future inaccuracies
    (e.g., name or SSN)
  • adjust a person's tax record

6

Central Office

Report tax statement corrections to taxpayer and operating location

Copies of W-2c, W-2 and/or other tax statement along with a letter explaining the reason for the correction.

7

Central Office

Report tax statement corrections to IRS, SSA, and state and local governments

W-2c or W-2 along with W-3c or W-3, Transmittal of Wage and Tax Statements

RF Forms

The following RF forms are available from the Payroll Forms resource area:

Change History

 

 

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