Yesterday I got the W2's printed at work. It takes a lot of work to get them ready. I have to search government documentation each year from both the IRS and the Social Security Administration each year to make sure that all of the changes for the tax-year have been incorporated into our reporting process. Then I make any modifications necessary in my programs that produce the W2's.
The accounting department has to balance the information that I have gathered from my programs for the W2's with the information that they have already sent to the IRS for tax reporting purposes. We will produce a file that we Send to Social Security (SSA) that has each employee's earnings and withholdings. SSA will then forward the information to the IRS. Meanwhile all throughout the year, the IRS has been receiving tax information from the employer regarding earnings and tax withholdings, as the withheld taxes have been remitted to the government. The numbers sent to the IRS are just aggregate numbers for the employer, not each individual's personal tax information. The data we send to SSA contains each individual taxpayer's earnings and withholdings. When SSA passes the detailed information along to IRS, then IRS compares the aggregate tax and earnings information with the detailed information received from SSA. If they don't balance, guess who's in trouble?
So naturally we take great pains to make sure that the detailed data (SSA) balances with the aggregate data (IRS) before we send it in -- and before we print paper W2's for employees. It is interesting that the detailed data is not due to be sent in to SSA until March 31st of each year.
If you are an early tax filer, and getting a refund, you can have your tax refund cashed long before the IRS even knows what your taxable earnings and withholdings really were. Of course, once they do get the information, it will be cross referenced with your tax return information. If what the employer has sent in via the detailed SSA data, and what was on your return didn't match -- you can expect to get a nasty letter from the IRS. Bottom line is -- Don't Cheat! You might get away with it for a little while, but sooner or later that nasty letter will come, and along with it a whole "Bucket O' Trouble".
You might be interested to know, that even if you file your taxes on paper forms, rather than using electronic filing (via a software package like Turbo Tax, or with a professional tax preparer) that your paper tax return has to be manually entered into the IRS database by an IRS employee. It eventually will appear on the IRS computer systems essentially the same, whether you filed electronically, or on paper. However, with paper filing, you run an additional risk-factor that the IRS employee who typed your return into the database might have a "happy finger moment" and unintentionally type an error on your return information. It is possible that you could get a "nasty" letter by mistake. I'm sure the likelihood of a typo is relatively low, but it is an added risk to filing with paper returns. (Imagine if you worked for the IRS, and it was your job to data enter tax returns all day, every day -- wouldn't that be just about the most boring, mind-numbing job you could think of?) It takes several months for all of the paper returns to be entered into the IRS database (until about August or September, if I remember right). So if you file by paper, and there is a problem, your "Nasty" letter might not show up until the Fall sometime.
Next I will be processing the W2's we just printed into our imaging system at work. That way the finance department will be able to print out copies of returns, as they are requested by employees. Usually reprint requests come in two varieties. People who have lost their W2, and people who are applying for a loan.
People who have lost their W2's usually don't discover this (alleged) fact until about 5:00 pm on April 14th. Now they are in a hurry to finally start on their taxes, and suddenly discover they can't locate their W2.
On the other hand, every time somebody wants to buy or refinance a home mortgage, or get an new auto loan, they need to have the last 2 or 3 years worth of W2's. With the low interest rates we have experienced the last few years, we have had a lot of requests for back-year W2's. Until we started imaging them, this was quite a hardship on the finance employees. Now they can bring up a W2 for any of the last 4 years, and print out a copy in seconds without having to leave their desk. That sure beats having to go find the bound employer copies in the archives, and make a photo copy of each year requested.
I also have a redundant way of producing W2's outside of the imaging system. We keep the W2 data on line for each year. I create an overlay image of the W2 form each year, and then run a program that retrieves the data, and merges it with the form overlay and prints out a "new" W2. That just gives us double coverage of the W2 information, incase the imaging system goes down for any reason (its only been down about a total of 30 minutes in the last 4 years! - and then all I had to do was re-boot the imaging server, and it was good-to-go).
Well, that's probably more than you ever wanted to know about W2's and filing taxes, but its something that most people don't know.
Tomorrow, I will be getting my charitable donations receipt from the church. It will be the last thing I need before beginning work on my taxes. As for me, I will be using Turbo Tax.
Merry Tax Season, Everyone!