Apr 26, 2021

What’s a W-3 Form and Should You File One?

We’re sure there are business owners out there who possess a deep understanding of every IRS tax form and the corresponding rules. These individuals are also probably members of Mensa, can locate Liechtenstein on a map, and solve Rubik’s Cubes one-handed.

The rest of us, however, have questions. For example, what is a W-3 form? And how does the IRS form W-3 differ from the W-2 and W-4 form? Also, where is Liechtenstein?

Understanding IRS Form W-3

The IRS Form W-3 is also known as the “Transmittal of Wage and Tax Statements.” Employers use it to report the total amount of wages and taxes they withheld for employeesso if your small business has employees, you’ll likely need to submit these forms each year. The IRS and Social Security Administration (SSA) will then use them to review each employee’s wages and salary from the past year, as well as commission, tips, and other compensation.

Basically, the W-3 serves as a companion to your employees’ W-2 forms. The 2 documents are submitted together, with the W-3 allowing the IRS and SSA to make sense of the wages you paid your employees and the FICA taxes you’ve reported.

Since we’re on the topic of IRS forms starting with “W,” let’s take a moment to explain how the W-2 and W-3 differ from the W-4. While the W-2 and W-3 are used to assist tax preparation and processing, the W-4 comes into play earlier in the game. Employees complete this form when they’re hiredsome employers also require an annual resubmissionand the W-4 then lets you know how much money should be withheld from each paycheck to be sent directly to the IRS.

But Do I Need to Submit an IRS Form W-3?

That’s an excellent question. And here’s a simple answer: if you are required by the IRS to file a W-2, you’ll also need to send in a W-3. They work together to give a complete picture to the IRS and SSA, so there’s not much point in only providing 1 of them.

Now you might be wondering if you need to file a W-2. After all, it’s not much help to tell someone that they need to do Thing B if they do Thing A when the person isn’t sure about Thing A to begin with.

Here are 4 simple questions to ask yourself. Answer yes to them, and you’ll need to file a W-2 and a W-3.

  1. Did you withhold any income from employees’ wages?
  2. Did you withhold any Social Security from employees’ wages?
  3. Did you withhold any Medicare tax from employees’ wages?
  4. Even if you didn’t do any of the things listed above, did you pay more than $599 in wages?

A yes to any of these questions equals a resounding yes to a W-2 and a W-3. You’ll need to deliver the W-2s to your employees no later than January 31 of every year. The W-3, on the other hand, won’t go out to them. It’s only for the IRS and the SSA.

Where Do You Get the IRS Form W-3?

The IRS is particular about their forms, so don’t expect to simply pick up a ream of W-3s on your next Costco run. Everything must be done according to protocol for your business to enjoy a smooth tax process.

“You can’t just copy a W-3 form or print it off the internet because the form is printed with a special red ink,” explains tax expert Jean Murray. “You must buy the required type of W-3 forms from the same place you buy your W-2 forms, or you can have your payroll processor or tax preparer complete them for you. You can order them from the IRS by visiting their online ordering page for information returns. You may also be able to find these forms on business tax software programs.”

The good news is that the process of filling out your IRS Form W-3 isn’t complex: simply follow the instructions provided and use the W-2 as your reference point.

OK, but Where’s Liechtenstein?

It’s no wonder that you don’t know where Liechtenstein is. The country is only about 62 square miles, has fewer than 40,000 total residents, and has no airport. But if you know how to find it on a map, you’ll surely impress your friendsassuming you’re in front of a map and someone mentions that they have no idea where Liechtenstein is.

First, find Zürich on a map of Europe. It’s a major city in the middle of Switzerland’s northern region. Got it? Now just drag your finger to the right and slightly downward. About 70 miles southeast of Zürich, you’ll find the tiny little nation that has mystified Americans for generations.

Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.

About the author

Grant Olsen
Grant Olsen
Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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