On Friday, October 30, the IRS provided guidance regarding the proper reporting on Form W-2 for employers who deferred the withholding of the employee share of Social Security tax under Notice 2020-65. (See earlier coverage.)  Based on the IRS guidance, employers should report FICA wages up to the OASDI (Social Security) wage base in Box 3 of the 2020 Form W-2.  Only the amount of Social Security tax actually withheld during 2020 should be reported in Box 4 of the form.

In 2021, if the employer withholds the 2020 deferred Social Security taxes, the employer must file a Form W-2c for 2020 reporting the additional withholding in Box 4.  Although the IRS guidance does not address this, if the employer pays in 2021 the employee’s share of Social Security taxes that were deferred in 2020, the employer must still file a Form W-2c reporting the amount as withheld Social Security taxes in Box 4.  Moreover, the employer would also be required to include the amount of taxes paid by the employer on the employee’s behalf as additional wages in Boxes 1, 3 (up to the OASDI wage base), and 5 on the employee’s 2021 Form W-2.  Because the employer’s payment of the employee’s deferred tax constitutes additional wages to the employee in 2021, these amounts will need to be grossed up to account for employment taxes on the amount of the employee’s tax paid by the employer if those taxes are not withheld from the employee’s other 2021 wages.

The IRS provided similar guidance for employers subject to the Railroad Retirement Tax Act.  In general, FICA wages up to the wage base should be reported in Box 14 of the 2020 Form W-2 along with any RRTA Tier 1  tax actually withheld.  The employer must then file a Form W-2c for 2020 reporting amounts of deferred RRTA Tier 1 tax withheld from the employee in 2021.

In either case, an employee is not required to take any steps in response to receiving the Form W-2c unless they had more than one employer during 2020.  If employed by more than one employer, the employee should confirm that excess Social Security or RRTA Tier 1 taxes were not withheld for 2020.  If excess taxes were withheld, the employee may file an amended personal income tax return to claim a refund of the amount of excess withholding.