If an employee's withholding taxes were incorrect for the previous year, should an employer re-file the employee's withholding taxes and issue a corrected W-2 form?

ANSWER

The BIDaWIZ Team's Answer:

Yes, you would need to provide the employee and the Social Security Administration with a corrected Form W-2 (Form W-2c) reflecting additional FICA earnings, if applicable, for the prior year and FICA tax withholding as if the employer had made it correctly. This change to FICA wages and FICA tax withholding generally does not affect the employeeâ??s prior-year individual tax return. The regulations provide a specific remedy to allow an employer to recover from the employeeâ??s pay the FICA taxes that the employer paid on the employeeâ??s behalf (IRC Section 31.6205-1(d)(1)). If the employer does not recover the amount from the employee, the payment of the employee share of FICA tax by the employer is current wage compensation subject to FICA and income tax withholding and is reflected on the employeeâ??s year-end Form W-2.