Form W-3 is a tax form submitted to the International Revenue Service (IRS) and the Social Security Administration (SSA). Employers submit the form to report combined employee income.
The IRS uses Form W-3 as a benchmark to compare figures from W-2 forms submitted by individual employees. Whether you run a small business or a large, global organization, it’s compulsory to submit Form W-3.
What is Form W-3?
Also known as Transmittal of Wage and Tax Statements, Form W-3 collates all parts of Form W-2. The IRS uses Form W-3 to track all forms of compensation paid to employers. Compensation methods include wages, salary, commission, and tips.
The SSA uses Form W-3 to reconcile all employee wages reported for the previous year, ensuring that all Federal Insurance Contributions Act (FICA) taxes have been reported. Form W-3 is one of the critical forms to complete during the tax year. Business owners required to file Form W-2 must also submit Form W-3 to remain compliant.
Who Needs to File W-3 Form?
Employers are responsible for submitting the W-3 form before January 31 each year, giving employees enough time to file their individual tax returns by April 15. In most instances, the responsibility falls on the shoulders of the finance manager to submit the necessary tax forms.
Employers must also mail employees copies of their Form W-2 by the same date. The employer also reviews all Form W-2s from the workforce, summarizes wages and tax information, and combines the information into a single W-3 form.
The form may be submitted in various ways. The easiest method is through payroll software that is registered with the Business Services Online (BSO) portal. E-filing is becoming increasingly popular, and the SSA strongly encourages employers to submit forms through online methods. With the increase in tax software options, online submissions are easier than ever.
To be safe, it’s worth keeping paper copies on file as a backup, as you never know when you’ll need a physical copy of the form.
What’s Included in a W-3 Form?
A valid Form W-3 includes the following information and details for the IRS to cross-reference and verify.
- Business details including employer identification number (EIN), legal address, contact information, employer’s name, establishment number, etc
- Total state wages paid to employees, including salary, tips, commission, and other forms of compensation
- Total Medicare tax and Social Security tax withholding
- Total federal income tax withholding
- Total state income tax withholding
- Total taxable Medicare wages and tips
- Total Social Security wages and tips
Sections in IRS Form W-3
The individual sections of Form W-3 may seem confusing initially, but it becomes much easier once you understand the requirements.
An example of the form on the IRS website provides an example of sections.
- W-3 control number — the unique number used by an employer to recognize individual W-2 details
- Box B Kind of Payer — the type of payer that the business operates as (the accounting department or legal team can offer insight)
- Box B Kind of Employer — the type of employer such as non-profit, government entity, or none-apply if neither
- Boxes 1-19 — the total of all income and tax information as per the prompts
What’s the difference between Form W-2 and Form W-3?
The IRS uses both Form W-3 and Form W-2 to track employee compensation throughout the year. The main difference between the two is the person who completes the form.
The employer completes Form W-3 while the employee completes Form W-2 for the IRS. Employers are then responsible for filing both employee W-2 forms and W-3 forms before the deadline of January 31 each year.
Take note that independent contractors use 1099 forms instead of Form W-2.
There is also a Form W-4 which is completed by employees upon hiring, informing an employer of how much to withhold from their paychecks.