The NC Legislature, without much warning or lead time, changed the W-2 due date for NC employers. The old W-2 due date was the end of February. Now employers must send the the employer copy to the NC Department of Revenue by January 31, 2016. This W-2 due date change is also tied into a new mandatory electronic filing of W-2s effective for 2015 forms.
NC now requires Electronic Filing
The Legislature, as is true of most elected bodies, lacks many people with practical real world experience. On September 23, 2015, the Legislature passed H.B. 117 (PDF) requiring the new due date. But that was not enough for our Legislature, they decided to also require that all W-2s for 2015 be filed electronically. The only exceptions were for those employers requesting a hardship extension. Really? A little less than 3 1/2 months to get an entire new system setup.
For large employers and those using large payroll processing firms, the electronic requirement is no big deal. They had already invested in software for electronically filing W-2s. Their adjustment is to the new due date only. Smaller employers did not often have the capability to electronically file W-2s with NC. In addition, many of the payroll software vendors catering to small businesses did not have this capability. Even last year I saw handwritten W-2s from some small employers. The Legislature’s solution was to require the NC Department of Revenue to provide an online filing process.
Just this Monday (January 25th) , the NC Department of Revenue finished their programming to allow a simple method for electronically filing W-2s. Fortunately, the Department exercised its authority to grant hardship waivers without making employers apply. You can see their notice here. Basically, small employers can still file paper W-2s for 2015. Find more information on NC electronic filing here.
NC W-2 Due Date change
NC employers had until the end of February 2015 to file W-2s with NC. This would allow employers to provide the W-2s to their employees by the end of January. Then if an employee had needed a correction, the employer had time. For example, if the Social Security Number, the employee’s name or address were wrong things could be fixed before the forms went to the government. No such option now.
Reason for the change
The stated reason is to help prevent identity theft. If NC is able to match the electronically filed W-2s to the individual returns before issuing a refund this should help a lot with identity theft. Considering the short time the Legislature gave to the Department of Revenue, I expect there will be problems this year.
Future Federal W-2 due date change
In December, Congress changed the due dates for 2016 W-2 forms due in early 2017. Congress also made the change to combat identity theft. At least Congress is giving employers time to adjust. The employer will have to file 2016 and future W-2s by the end of the following January. In years past employers who electronically transmitted forms W-2s received an extra month to file them with the government. Instead of the general end of February W-2 due date, electronic filers had until the end of March. No more!
Conclusion
Employers need to adjust their payroll processes to comply with the new due dates. Late filers will owe penalties. NC charges $50 per late W-2. IRS charges up to $100 per W-2 for 2015 W-2s and up to $260 for 2016 W-2s. Penalties are just money down the drain. Taxpayers cannot even deduct the penalty to reduce their income taxes.
So file those NC W-2s before the end of January!