Payroll in Practice: 6.27.2022

Question: An employer paper files Forms W-2 and, for its own records, retains the paper Copy D. An employee requested copies of Forms W-2 for the past several years in order to file tax returns. Is a photocopy of Copy D adequate, or must a new Copy B be prepared?

Answer: Technically, the employer should prepare a “reissued” Form W-2, Wage and Tax Statement, using the correct copies. The recipient copies – Copy B, to be filed with employee’s federal tax return; Copy C, for employee’s records; and Copy 2, to be filed with employee’s state, city, or local income tax return – each contain preprinted information, notifications or instructions on the form’s front and back. Copy B also contains features that are not on Copy D and help the IRS process the forms.

However, while preparation of a reissued set of employee copies is a best practice, a photocopy of Copy D with the word “Reissued” across the top should be adequate for preparation of past-due returns.

One reason to reissue the recipient copies relates to nonstandard Forms W-2, which have factored in identity theft tax fraud. When a return is e-filed by a tax professional or electronic return originator, the paper copies of the Forms W-2 are not submitted with the electronic tax return. However, the ERO is to indicate when a W-2 is nonstandard.

A nonstandard W-2 is one that is either altered, handwritten, or typed. In the past, “nonstandard” also included photocopies. Many taxpayers download their Forms W-2 from an employee portal or receive computer-generated paper copies. Computer-generated forms are considered standard.

The IRS prefers the use of official forms or an approved substitute. However, in the case of late-filed returns, the IRS is more concerned that the returns are prepared and submitted as quickly as possible than with which copy of the W-2 is used to prepare the return.

For late-filed returns, the IRS already has the W-2 information the employer provided to the SSA, so the IRS does not have to rely on the paper W-2 attached to the return to verify the numbers. Also, the employee could use the information from the IRS Wage and Income Transcript to obtain the W-2 information needed to prepare the federal return. However, the employee may still need to obtain a W-2 copy from the employer, because the IRS transcript does not show any state or local information necessary for preparation of state and local returns.

In cases involving past-due tax returns, the IRS often has already issued letters to the taxpayer requesting the returns. In some cases, the letters may also include income and withholding information. A photocopy of Copy D with the word “Reissued” across the top should be adequate for the needs of the employee.

Any replacement forms given to the employee must be the correct forms for the tax year involved, so the dates on the forms cannot be crossed out to create a form for a different year. Many employers do not keep a supply of prior-year forms on hand. However, prior-year forms may be downloaded from the IRS website. In addition, employers registered to use the SSA’s Business Services Online can create and print Forms W-2 for the current and previous three tax years.

The IRS notes that employers are not prohibited from charging a fee for providing a duplicate W-2 to an employee.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., or its owners.

Author Information

Patrick Haggerty is the owner of a tax practice in Chapel Hill, N.C., and an enrolled agent licensed to practice before the Internal Revenue Service. The author may be contacted at phaggerty@prodigy.net.

Do you have a question for Payroll in Practice? Send it to phaggerty@prodigy.net.