IRS Form W-3, transmittal of wage and tax statements

The day you hire your first employee as a small business owner, a new universe of payroll, tax, and other accounting responsibilities appears.

Figuring out tax forms, such as Form W-3, however, isn’t at the top of a small business owner’s task list (more often than not). We get it. To help you quickly understand the essentials, we created this post to explain one of the main forms necessary when reporting wages for your first employee. Read on!

What is Form W-3?

With your new hire(s), you’ll need to fill out an IRS form showing transmittal of wage and tax statements. This appears on Form W-3, which reports the total employee wages and taxes withheld by a business on behalf of its employees.

It’s used by the IRS and the Social Security Administration (SSA) to transmit Form W-2 information for employees. Form W-3 is used for all W-2 employees getting paid by a business or legal entity. It tracks any financial compensation an employer pays an employee within a tax year and shows:

  • Federal Insurance Contribution Act (FICA) taxes withheld from W-2 employees’ paychecks
  • Total Social Security and Medicare wages to employees
  • Total federal income tax withheld from an employee(s) paycheck

Who should submit Form W-3?

Form W-3 is used like a cover sheet to transmit Forms W-2 to the SSA.

If you paid a W-2 employee $600 or more in wages in a tax year, or withheld any income, Medicare, or Social Security from an employees’ wages, or would have had to withhold if the employee had not claimed an exemption from withholding, you should file Form W-3.

How often should you file the W-3 Tax Form?

You must file the W-3 annually if you are required to issue a W-2 to at least one employee(s).

How is Form W-2 different than a W-3?

Every employer who’s required to file one or more W-2 forms must also file Form W-3.

The difference in the forms is that the:

  • Form W-2 reports total wages and taxes withheld for each employee individually.
  • W-3 reports the total (taxable) wages and withholdings for all employees collectively by the employer.

Remember: you should include the W-2 tax forms of every employee. If you have five employees, you need to send in five W-2 forms. The sum from all the W-2 forms should be equal to the amount reported on your form W-3.

How is IRS Form W-3 different than a W-4?

While IRS Forms W-3 and W-4 have similar information, one is filled out by the employer and one is filled out by  the employee. A W-4 is a customary form an EMPLOYEE fills out for an employer, whereas a W-3 is filled out by an EMPLOYER for the SSA. A W-4 has form fields that inform how much tax should be withheld from an employee’s paycheck.

Why file IRS Form W-3?

When a business owner has employees, they need to comply with requirements to file payroll tax returns, such as Forms W-2 and W-3, with the SSA to report the total wages earned for income, Social Security, and Medicare purposes and to report taxes withheld for the employee to the SSA and the IRS.

The IRS and SSA make sure all income is reported correctly. IRS Form W-3 compiles employee W-2 forms, making sure all wages paid, income, and FICA taxes withheld by an employer are accounted for, making it a quick one-sheeter for the IRS and SSA.

How do you complete Form W-3?

In order to fill out Form W-3, you’ll need the following on hand:

  • Business identifying information, like your business’ name, address, Employer identification number (EIN), and other contact information
  • Sum of the following for all W-2s sent with the Form W-3:
    • Federal and state income tax withheld
    • Employee’s share of Medicare tax withheld
    • Employee’s share of Social Security tax withheld
    • Wages paid to employees (salary, tips, commission, and other compensation) paid to employees over the prior year
    • Taxable employee wages for Social Security and Medicare

When is the W-3 Tax Form due?

The W-3 Tax Form is due each year on January 31 to the SSA. You must submit it each year your business pays employees and is required to file a W-2. The IRS then obtains the information from the SSA.

How do you file Form W-3?

You can file the Form W-3 online or mail in the form. You can also e-file the form.

More help with transmittal of wage tax statements and other small business tax forms

If you find the form to be too complex, or simply want to delegate the task of completing your small business payroll tax requirements to a tax pro, we have your back!

Let Block Advisors help with small business services like tax preparation, payroll, and bookkeeping. Our team is your team. Learn more about our small business tax preparation and how we can help you.

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