This edition, we’ll go over a previous question about penalties and talk about worker status with another CPP exam question on the topic.
In our last edition of the Certified Payroll Professional Corner (CPP), we talked about penalties.
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Penalties. As previously noted, there are many penalties that an employer may face if not in compliance with payroll rules, regulations, and laws. A number of these penalties can come from the IRS, including a failure to: file a return on time, pay a tax on time, prepare an accurate return, and provide accurate information returns.
Going up. Forms W-2 (Wage and Tax Statement) must be filed with the Social Security Administration (SSA) by January 31 of the following tax year. For tax year 2022, the failure to file and failure to furnish penalties, and penalties for intentional disregard of filing and payee statement requirements, are increasing due to adjustments for inflation. The higher penalty amounts apply to returns required to be filed after December 31, 2022.
These penalty amounts increase incrementally as follows: up to 30 days late ($50 per Form W-2); more than 30 days late but before August 1 ($110 per Form W-2); and after August 1 ($290 per Form W-2). The 2022 Form W-2 instructions note that the annual maximum penalty for failure to file returns is $3,532,500 ($1,177,500 for small businesses).
Last edition’s question. We asked: “What is the penalty amount for each Form W-2 correctly filed more than 30 days late but before August 1?” The correct answer to this question is “b. $110 per return.” For tax year 2022, the penalty per late return for the period it is correctly filed after August 1 increases from $280 to $290.
The penalties regarding information returns, including Forms W-2, are discussed in Payroll Guide ¶4294. These penalties are also discussed in Payroll Guide ¶4262 on the topic of correcting wage and tax statements. Payroll Guide ¶4260 goes over the Form W-2 in general. For more information on penalties, see Payroll Guide ¶4290 et seq. In addition, the IRS has a webpage on information return penalties.
Verifying worker status. All U.S. employers must properly complete Form I-9 (Employment Eligibility Verification) to verify the worker status of individuals hired for employment in the United States. On the form, an employee must attest to his or her employment authorization. The employee must also present his or her employer with acceptable documents evidencing identity and employment authorization.
The employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and relate to the employee and record the document information on the Form I-9. Employers must retain Form I-9 for a designated period and make it available for inspection by authorized government officers. The current version of Form I-9 expires on October 31, 2022.
CPP quiz question. There are three sections to Form I-9. Employers must complete and sign Section 2 of Form I-9 within a certain period of time from the date of hire (first day of work for pay) for a new employee. What is that period of time?
- three days
- two weeks
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