We’re rapidly coming to the end of the calendar year. As the festivities celebrating the holidays and the New Year are underway, it’s not too soon to start thinking about W2 requirements for nonprofits.
Nonprofits are subject to the same regulations concerning employee taxes and social security taxes as for-profits, with a few exceptions. Clergy may opt out of social security, for example, and thus, religious institutions may choose to exempt their clergy from paying into social security.
Employees sometimes erroneously believe that working for a tax-exempt organization makes them tax-free too. It does not. It is incumbent upon your organization to issue W2s in a timely fashion and to assist employees with any background paperwork they need to report income and taxes accurately.
Preparing W2 forms doesn’t have to be a laborious process. Take time now to run through this simple checklist of what you need to prepare W2 forms for your employees and gather together all the paperwork and info you need so that you have it on hand.
- W4 Forms: You are required by law to have a W4 form on file for every employee of your company. Each employee should complete the W4 form upon being hired by your nonprofit. It includes their legal name, federal income tax withholding, marital status, number of dependents, and any additional information to assist with withholding accuracy. Employees can update their W4 forms at any time and should review them annually to make sure that no information has changed. They may also update their additional withholding at any time.
- Legal identification information: Ask employees to verify all of their legal information including their name, social security number, and mailing address. You’d be surprised at how many people forget to alert the HR department when they move or change names.
- Organization information: Confirm the organization’s information for W2 forms as well. You will need the legal entity name, address, contact name, email address, state and federal ID numbers.
- Annual payroll reports: Even if your nonprofit operates on a different fiscal year, the W2 is always calculated on the calendar year. Run your reports now. These should include Payroll Summary Report, Employer Summary Report, Master Adjustments Report for Deductions, Contributions and Other Income, and quarterly 941s.
- Generate W2 forms: You can use an automated system to generate W2 forms or use the IRS W2 form to prepare each employees’ forms.
- Print the W3: The W3 remains in your offices and provides a copy of all of the data submitted.
- File W2: The W2 forms must be filed with the appropriate government agencies by January 31.
Do Small Nonprofits File W2 and W3 Forms?
All nonprofits, regardless of the number of employees, must file W2 and W3 forms. You may think it’s silly to file these forms if it’s only yourself and a handful of others who work at your nonprofit. But you and others will need W2 forms to complete your income tax forms and to adhere to all government regulations.
All of the forms that you need to complete, along with detailed instructions, may be found on the IRS website. It’s easy to complete W2s, just tedious to collect and confirm the data needed. Start now to ensure that you’re all set in January to get those form files.
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.