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Excerpt From Our Online Payroll Compliance Course

Reconciling Forms W-2, W-3, and 941

When there are discrepancies between Forms 941 filed with the IRS and Forms W-2 and W-3 filed with the SSA, the IRS must contact the employer to resolve the discrepancies. This costs time and money for the Government and for the employer.

To help reduce discrepancies:

Do not report on Form 941 backup withholding or federal income tax withholding on nonpayroll payments such as pensions, annuities, and gambling winnings. Nonpayroll withholding must be reported on Form 945, Annual Return of Withheld Federal Income Tax. See the separate Instructions for Form 945 for details.

Federal income tax withholding required to be reported on Forms 1099 or W-2G must be reported on Form 945. Only taxes and withholding properly reported on Form W-2 should be reported on Form 941.

Amounts reported on Forms W-2, W-3, and 941 may not match for valid reasons. If they do not match, the employer should determine that the reasons are valid. Retain the reconciliation so that a record is exists of why amounts did not match in case there are inquiries from the IRS or the SSA.

See the Instructions for Schedule D (Form 941) if there is a need to explain any discrepancies that were caused by an acquisition, statutory merger, or consolidation.

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