JUNE 2004

 “SO, YOU NEED ANOTHER W-2, DO YOU?”

We have heard these stories so many times before: “Hello, my name is Brent and my employee number is 1234. I was driving home from work yesterday and when I pulled up to the toll booth and opened my window to give the attendant my money, a huge wind came along and papers on the front seat began to swirl around the inside of the car, and before you knew it, those papers flew out the window as I was pulling away from the toll booth. One of those papers was my W-2 that my manager handed out a few weeks ago. When can I come to your office to pick up a new W-2?” What are the employers’ responsibilities in issuing and replacing an employee’s for m W-2? As you well know, an employee’s form W-2 must be issued on or before January 31 each year. Once the original form W-2 is issued, the employer’s legal responsibility has been completed. While there is no legal requirement to honor a request from an employee for reissuing an employee’s misplaced form W-2, the IRS has asked us, as payroll professionals, to be responsive to employee requests for reissuance of lost or misplaced forms W-2, for at least the current year. (The current year form at this time would be the 2003 form W-2).

Policy and Procedure
Should you accept Brent’s request for a form W-2 reissuance over the phone? NO! The employer should establish a company policy that requires the employee to submit these requests in writing. The purpose for this is to have a written records of the request and of the reissuance taking place. It helps in determining that the request is indeed, coming from the employee. Additionally, there is a silver lining in requiring the request in writing. By having the employee fill out a form for the request, the employee will be providing the latest up to date information on that employee, which can then be updated in the payroll system. I would make sure all locations have blank copies of the Request for Duplicate Form W-2 . When issuing a form W-2, the employer must be sure to follow certain IRS requirements. When issuing a duplicate form W-2, type ‘REISSUED STATEMENT’ on the new copies. Employers are not required to use the IRS W-2 form when issuing a duplicate copy. The employer can use any substitute W-2 form. It is also permissible to make photocopies of the employer’s copy of form W-2. One procedure I always had in place was to keep a complete second set of the employees form W-2 on file in my office. Once I knew my W-2s were balanced and the originals distributed to the employees and to the Social Security Administration, state and local agencies, I would have my information technology department print a complete second set of the employees’ form W-2s. As requests would come in from the field, I would simply look up the employee’s form W-2 in my second set, type “REISSUED STATEMENT” on the form, document it and release it to the employee. This process saved a lot of time. With today’s technology, I would want to have the W-2 file available to the payroll department so all we had to do is perform a look up in the system and print the duplicate form for re-issuance to the employee.

Recouping Administrative Costs
Can you charge an employee a fee for issuing duplicate forms W-2? Yes. There are some reports of employers charging $25 and $35 per form. The most charged by an employer was $125 per reissued W-2. There is no limit on the amount an employer can charge. The American Payroll Association reports in its 2003 Survey of Salaries and the Payroll Profession that, on average, only 10% of employers responding to the survey actually charge a fee. The most common fee charged was reported as $5 or $10 per reissued form. Some employers provide the original form W-2 to employees in an electronic format. This could be in the form of an attachment to an e-mail or sitting out on the employer’s intranet, and the employee can access the form at any time. This wipes out any chance of the W-2 blowing away in a windstorm. The employer must generally maintain access to the form W-2 on the website through October 15 of the year following the calendar year to which they relate. So, 2003 form W-2 must remain available on the site until October 15, 2004. The preferred process, as discussed above, would be to allow the employees access to a secured website where the employees could print a new form. Good luck!

Source: BNA Payroll Guide-January 28, 2004.

PUT ALL FAMILY LOANS IN WRITING….OR ELSE

If your brother-in law hits you up for money, it may be awkward to ask him to sign a formal loan document. Our advice: Do it anyway. Documentation is critical on any family loan. If the loan goes bad, you’ll want to claim a tax deduction . But without proper paperwork, an IRS auditor will say the transaction was a gift, which means no deduction for you and a possible problem with a missing gift-tax return as well. So you need evidence that the deal was, in fact, intended as a loan. That means a written promissory note, which includes the following details:

• The interest rate.
• The dates and amounts for interest and principal payments.
• Security or collateral for the loan.

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