IRS Instruction W-2 and W-3 – IRS Forms, Instructions, Pubs 2026 – As an employer, understanding the IRS instructions for Forms W-2 and W-3 is crucial for accurate wage and tax reporting. These forms ensure compliance with federal requirements, helping you avoid penalties while providing employees with essential information for their tax returns. This comprehensive guide covers the general instructions for Forms W-2 and W-3, including territorial variations like W-2AS, W-2CM, W-2GU, W-2VI, and W-3SS, as well as corrections via W-2C and W-3C. We’ll break down key updates, filing requirements, and step-by-step guidance based on the latest 2026 IRS instructions (applicable for 2025 wages filed in 2026).
What Are Forms W-2 and W-3?
Form W-2, Wage and Tax Statement, reports an employee’s annual wages, tips, other compensation, and withheld taxes (including federal income, Social Security, and Medicare taxes) to the employee, the Social Security Administration (SSA), and the IRS. It’s issued to each employee and used for personal tax filing.
Form W-3, Transmittal of Wage and Tax Statements, serves as a summary cover sheet that aggregates data from all W-2 forms and transmits them to the SSA. It’s not sent to employees but is essential for employers to reconcile totals with quarterly tax returns like Form 941.
These forms also apply to territorial employers using variants such as W-2AS (American Samoa), W-2CM (Commonwealth of the Northern Mariana Islands), W-2GU (Guam), W-2VI (U.S. Virgin Islands), and W-3SS (transmittal for territorial forms). Corrections are handled through W-2C (Corrected Wage and Tax Statement) and W-3C (Transmittal of Corrected Wage and Tax Statements).
The purpose of these forms is to ensure accurate reporting under IRS Sections 6051 (wage statements) and 6109 (employer identification numbers), supporting SSA benefit calculations and IRS tax compliance.
What’s New in the 2026 Instructions for Forms W-2 and W-3?
The IRS updated the general instructions on January 30, 2026, incorporating changes from recent legislation and adjustments for inflation. Key updates include:
- Public Law 119-21 (One Big Beautiful Bill Act): Raises the reporting threshold for wages without federal withholding from $600 to $2,000 (inflation-adjusted after 2026). Introduces deductions for qualified tips (up to $25,000) and overtime compensation (up to $12,500 or $25,000 for married filing jointly). Adds Trump accounts with employer contributions up to $2,500 annually (reported via new code TA in Box 12).
- Form Revisions: Box 14 is now split into 14a (Other) and 14b (Treasury Tipped Occupation Codes). Box 9 is reduced in size. New Box 12 codes: TP (cash tips), TT (qualified overtime), and TA (Trump account contributions).
- Social Security Wage Base: Increased to $184,500 for 2026 (affects Boxes 3 and 7).
- Penalties: Inflation-adjusted increases for failures to file or furnish, starting at $60 per form (up to $340) with maximums up to $4,191,500. Intentional disregard penalties are at least $690 per form with no cap.
- Other Changes: New extension process for furnishing employee copies via Form 15397. Updated OMB number (1545-0029). Emphasis on e-filing and reporting for State Paid Family and Medical Leave Act (PFML) contributions as wages.
- QSEHRA Benefits: Maximum permitted benefit (Code FF in Box 12) is $6,450 for self-only or $13,100 for family coverage.
These changes stem from legislation like the PFML Act and OBBBA, ensuring reporting aligns with new deductions and exclusions.
Who Must File Forms W-2 and W-3?
You must file if you’re an employer who:
- Withheld federal income, Social Security, or Medicare taxes from employee wages.
- Would have withheld taxes if the employee claimed no more than one withholding allowance or hadn’t claimed exemption.
- Paid $2,000 or more in wages (even without withholding).
This includes businesses, governments, tax-exempt organizations, households, agricultural employers, and third-party sick pay payers. Exceptions apply for certain election workers (under $2,000) or foreign agricultural workers.
Territorial employers use W-2AS, W-2CM, W-2GU, W-2VI, and W-3SS for local tax reporting. Agents or third-party payers can file but don’t relieve the employer’s responsibility.
Due Dates for Filing and Furnishing Forms W-2 and W-3
- Filing with SSA: Submit Copy A of Forms W-2 and W-3 by February 1, 2027 (for 2025 wages).
- Furnishing to Employees: Provide Copies B, C, and 2 by February 1, 2027. If employment ends early, furnish within 30 days, but no later than February 1.
- Extensions: Request a 30-day extension for SSA filing via Form 8809 (for extraordinary circumstances only). For employee copies, use Form 15397 for up to 30 days. No automatic extensions for employee furnishing.
- Business Termination: File by the due date of your final Form 941 or 944.
Late filing can trigger penalties, so plan ahead.
How to File Forms W-2 and W-3: Electronic vs. Paper
Electronic Filing (E-Filing)
Mandatory if filing 10 or more information returns (including W-2s and 1099s). Use the SSA’s Business Services Online (BSO) to create, upload, and submit forms—it auto-generates W-3. Request a waiver via Form 8508 if needed. E-filing is encouraged for accuracy and speed; rejections occur for errors like mismatched wages.
Paper Filing
Mail Copy A of W-2s and W-3 to the SSA (specific addresses in instructions). Group forms alphabetically or by SSN, use black ink, and avoid staples. For territories, send Copy 1 of W-3SS to local tax offices.
Do not mix electronic and paper submissions. For corrections, match the method to the original filing.
Penalties for Non-Compliance with W-2 and W-3 Filing
Penalties apply for late, incorrect, or missing filings:
- Failure to File: $60 per form if corrected within 30 days (max $698,500); $130 by August 1 (max $2,095,500); $340 after (max $4,191,500). Lower caps for small businesses (gross receipts ≤ $5M).
- Failure to Furnish to Employees: Same tiers as above.
- Intentional Disregard: Minimum $690 per form, no maximum.
- Fraudulent Filing: Civil damages of $5,000+ per form, plus potential criminal penalties.
Exceptions include reasonable cause, de minimis errors (up to 10 forms or 0.5%), or small dollar inaccuracies ($100/$25). Reconcile with Forms 941, 943, 944, CT-1, or Schedule H to avoid discrepancies.
Step-by-Step Instructions for Completing Form W-2
Use black ink, 12-point Courier font, and report on a calendar-year basis. Here’s a breakdown of key boxes:
| Box | Description | Key Notes |
|---|---|---|
| a | Employee’s SSN | Truncate on employee copies (optional); use “Applied For” if pending. |
| b | Employer EIN | Do not truncate. |
| c | Employer’s name/address | Match your Form 941. |
| 1 | Wages, tips, other compensation | Includes taxable fringes, bonuses; exclude most elective deferrals. |
| 2 | Federal income tax withheld | Report withheld amounts. |
| 3 | Social Security wages | Up to $184,500; includes tips. |
| 4 | Social Security tax withheld | Employee share only (up to $11,439). |
| 5 | Medicare wages/tips | No limit; includes Additional Medicare Tax over $200,000. |
| 6 | Medicare tax withheld | Includes Additional Medicare Tax. |
| 7 | Social Security tips | Reported tips. |
| 8 | Allocated tips | For large food/beverage establishments (not territorial). |
| 10 | Dependent care benefits | Section 129 benefits (not territorial). |
| 11 | Nonqualified plans | Distributions or vesting. |
| 12 | Codes (up to 4) | e.g., D (401(k) deferrals), W (HSA contributions), DD (health coverage costs), TA (Trump accounts), TP (cash tips), TT (qualified overtime). |
| 13 | Checkboxes | Statutory employee, retirement plan, third-party sick pay. |
| 14a | Other | e.g., union dues, Medicaid payments (Code II). |
| 14b | Treasury Tipped Occupation Codes | Required for Code TP. |
| 15-20 | State/local info | Not for territorial forms. |
For multiple codes in Box 12, issue additional W-2s. Ensure Box 5 ≥ Boxes 3 + 7.
Instructions for Completing Form W-3
Form W-3 totals data from W-2s:
- Box b: Kind of payer (e.g., 941, Household emp.).
- Box c: Number of W-2s.
- Boxes 1-8, 10-11, 12a: Aggregated amounts from W-2s.
- Box 15: State/employer ID (territorial ID for W-3SS).
- Include contact info and reconcile with quarterly returns.
Sign and date; one W-3 per form type.
Territorial Forms: W-2AS, W-2CM, W-2GU, W-2VI, and W-3SS
These are for U.S. territories and report local wages/taxes (not federal withholding). Boxes 15-20 are for local info; exclude Boxes 8 and 10. Check territorial rules for codes like TA, TP, TT. File W-3SS with SSA and Copy 1 with local offices. Federal employers in CNMI have special reporting.
Correcting Errors with Forms W-2C and W-3C
Use W-2C for individual corrections (e.g., SSN, wages) and W-3C as the transmittal. File as soon as discovered; match electronic/paper to original. Provide corrected copies to employees. For name/SSN only, complete relevant sections. Retain undeliverable copies for 4 years.
Download the Official IRS Instructions PDF
For the full details, download the official General Instructions for Forms W-2 and W-3 (2026) from the IRS website: https://www.irs.gov/pub/irs-pdf/iw2w3.pdf.
Staying compliant with W-2 and W-3 instructions protects your business and ensures smooth tax season operations. Consult a tax professional for specific advice.