When you hire your first employees, you take on a lot of new responsibilities. You have to set up payroll, calculate payroll taxes, and report this information to the IRS.
You may be familiar with Form W-2 and Form 1099-NEC that you provide to employees and independent contractors. But did you know if you submit any W-2 forms, you also have to submit a W-3?
Keep reading to learn about IRS Form W-3, who has to file a W-3, and how to file it.
What Exactly Is a W-3?
IRS Form W-3 is a tax declaration that employers submit to the Social Security Administration (SSA). It includes the totals of all your employees’ W-2 forms.
Also known as the Transmittal of Wage and Tax Statement, Form W-3 serves as a cover sheet for your W-2s. It verifies your total W-2 information and gives a formal summary of your quarterly employment tax (also known as FICA tax) payments.
W-3 vs. W-2 Form
Both the W-3 and W-2 forms contain information about the total wages you pay employees and the tax withheld from payroll during the year. However, there are some key differences to note between the two forms.
A W-2 form contains wage and tax information for a single employee. So every year, you have to file one W-2 for each employee you have. On the other hand, the W-3 form summarizes all the wages paid and taxes withheld during the year, which means you only file one copy of your W-3.
What’s more, when you file Form W-2, you have to distribute a copy to the Social Security Administration (SSA) and your employee and keep one for your records. With the W-3, there’s one copy submitted to the SSA and one copy for your records.
Do I Need to File a W-3?
Figuring out whether or not you have to file a W-3 is simple. If you file one or more W-2 forms for a given tax year, you must also file a W-3. This includes business owners who pay themselves wages. In other words, if you filed a W-2 for yourself, you still need to file a W-3. On the other hand, if you don’t have a payroll, you don’t need to file a W-3.
Employers that only hire independent contractors during the year distribute 1099-NEC forms instead of W-2s. If you only hired 1099 employees, you have no W-2 information to summarize; therefore, you do not need to file a W-3.
W-3 Form Deadline
W-3 has the same deadline as IRS Form W-2. You have to submit your W-3 form to the SSA by January 31st of the following year. If January 31st falls on a weekend, the deadline becomes the next business day.
Information Needed for W-3 Form
To fill out your W-3 form, you’ll need information on your business, wages paid, and tax withholdings.
Specifically, you should have:
- Business name and mailing address
- EIN (Federal employer identification number)
- Payroll records
- W-2 forms
Filling Out Your W-3 Form
You can find Form W-3 and its instructions on the IRS website. The first section of the form is where you enter information about your business and the types of W-2s you’re sending. The second section has boxes for you to add up the federal and local wage and tax information for all your W-2s. And finally, you’ll enter your contact information at the bottom.
Boxes A-H Employer Contact Information
Box A — Control Number
This is an optional box you can fill in with a number you generate yourself to keep track of your W-3 for internal records.
Box B — Kind of Payer/Kind of Employer
In Box B, you indicate what kind of payer and type of employer you are. You should only check one box in each section.
Kind of payer tells the IRS what type of W-2 forms you’re sending. Most private employers will select 941 (which means you also submit IRS Form 941 Employer’s Quarterly Federal Tax return), but you should check with your accounting or legal team to make sure you check the right box.
The type of employer section is also where you can say if you are a local or federal government employer with tax-exempt status.
Box C — Total Number of Forms W-2
Indicate the total number of W-2 forms you’re sending along with your W-3.
Box D — Establishment Number
If you run multiple businesses in the same location, you can use Box D to indicate that. For example, if you run a bakery that’s also a coffee shop, you can file separate W-3 forms for each business, or you can file their taxes together on one form.
Box E — Employer’s Identification Number (EIN)
Enter your 9-digit EIN. If you’ve applied for an EIN and don’t have one yet, enter “applied” in this box.
Box F — Employer’s Name
Enter the employer name used on Form 941 or Schedule H (Form 1040).
Box G — Employer’s Address and Zip Code
Fill in your business address.
Box H — Other EIN Used This Year
If you used another EIN during the year (such as a previous employer’s EIN), enter it here.
Boxes 1-19 Wage and Tax Information
Boxes 1-11 — Federal Wage and Tax Totals
Boxes 1-11 on your W-3 contain the same categories as boxes 1-11 on each W-2 form. When filling out boxes 1-11 on your W-3, total up the amounts of the corresponding boxes on your W-2s and enter those numbers on your W-3.
For example, Box 1 on your W-3 should be the total of all the Box 1 amounts on the attached W-2 forms.
Boxes 1-11 include:
- Box 1 — Wages, tips, and other compensation
- Box 2 — Federal income tax withheld
- Box 3 — Social security wages
- Box 4 — Social security tax withheld
- Box 5 — Medicare wages and tips
- Box 6 — Medicare tax withheld
- Box 7 — Social security tips
- Box 8 — Allocated Tips
- Box 9 — Leave blank
- Box 10 — Dependent care benefits
- Box 11 — Nonqualified plans
Box 12a — Deferred Compensation
Enter the total contributions that employees chose to make to retirement plans or Roth plans. You’ll see a code on their W-2 for whichever retirement they chose, and a dollar amount next to it (their yearly contribution). In case you’re wondering what those codes are, they include:
- D — 401(k)
- E — 403(b)
- EE — Designated Roth contributions under 457(b) plan
- F — 408(k)(6)
- G — 457(b)
- H — 501(c)(18)(D)
- AA — Designated Roth contributions under a 401(k) plan
- BB — Designated Roth contributions under a 403(b) plan
- Y — Deferrals under a section 409A nonqualified deferred compensation plan
There are additional codes used for things like income from exercising stock options or contributions to a health savings account (HSA).
You can find detailed descriptions of each code on the IRS General Instructions for Forms W-2 and W-3. When filling out your W-3, add up the amounts in box 12a on your W-2s, and enter the dollar amount on your W-3, not the codes.
Box 13 — For Third-Party Sick Pay Use Only
Check this box if you’re a third-party sick payer or report third-party sick payments.
This box only applies to you if you have contracted a third party to handle all sick pay, including short-term and long-term disability benefits, and your agreement states that the third party will issue W-2 and W-3 forms for the payment.
Box 14 — Income Tax Withheld by Payer of Third-Party Sick Pay
If you had employees who received third-party sick pay and had federal taxes withheld from those payments, indicate that amount here. This amount is included in your Box 2 total, but it should also be separately noted here.
Box 15 — State/State Employer’s ID Number
Provide the two-letter abbreviation for your state or territory. If you’re filing W-2s with information from more than one state or territory, do not enter an abbreviation here. Instead, enter an “X.”
Boxes 16-19 — State and Local Wage and Tax Totals
Boxes 16-19 are similar to boxes 1-11, but instead of reporting federal wage and tax totals, you’ll report state and local totals. If you have W-2s from multiple states and localities, you don’t need to separate them. Add up all your W-2 state and local totals and list them as one amount here.
Boxes 16-19 are defined as follows:
- Box 16 — State wages, tips, and other compensation
- Box 17 — State income tax
- Box 18 — Local wages, tips, and other compensation
- Box 19 — Local income tax
How To File Your W-3
The SSA recommends e-filing because it improves accuracy and is more secure than mailing your forms. You can use the SSA’s Business Services Online (BSO) portal to file Form W-3.
Employers filing more than 250 W-2 forms must file electronically. If you’ve got less than 250 employees, you can mail paper copies of your W-2s and W-3 to the SSA by sending them to one of the following addresses:
If sending from U.S. Postal Service, send to:
Social Security Administration
Direct Operations Center
Wilkes-Barre, PA 18769-0001
If sending from another carrier (such as UPS or FedEx), send to:
Social Security Administration
Direct Operations Center
Attn: W-2 Process
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997
How To Fix W-3 Form Errors
If you discover an error on your W-3 tax form after you’ve submitted it to the SSA, you can still make changes. To do so, you’ll file Form W-3c, which can be done online or via mail. If the error came from a mistake on a W-2 form, also file a W-2c for any W-2 form that had errors.
Make Your Tax Season Go Well
Hiring employees for the first time is certainly exciting, but it also means you have to brush up on your small business taxes. You need to file W-2 and W-3 forms each year for your employees. The good news is that once your W-2s are complete, you have everything you need to file your W-3. And there’s only one W-3 form.
Now that you know all about a W-3, all that’s left to do? Make sure you’re getting all the info you need when you hire an employee, so it’s easy to fill out come tax time!
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