United States

Automatic extensions eliminated for Forms W-2 starting in 2017

TAX ALERT  | 

The significant increase in tax-related identity theft has caused the IRS to remove the ability to request an automatic extension related to the filing of Forms W-2 and to reduce the available extension period from 60 to 30 days. The IRS has also signaled its intent to apply these changes to the extension procedures for many other information forms (such as Forms 1099 and 1098) over the next several years. See final and temporary regulations.

This change is an effort to combat a common scheme used by criminals where fraudulent tax returns are filed early in the filing season using false W-2 wage amounts and stolen social security numbers. The current extension regime increases the probability that refunds will be paid to the criminals before the IRS has received‒or been provided sufficient time to verify‒Forms W-2 filed by employers.

Employers are generally required to submit Forms W-2 on or before the last day of February if filing on paper, or the last day of March if filing electronically. Under current rules, an employer may file Form 8809 to obtain an automatic 30-day extension thereby extending the due date for electronically filed forms until the end of April, which is well past the date when a vast majority of individual tax returns are filed. In addition, employers may request a further 30-day non-automatic extension, which can push the due date for electronically filed Forms W-2 into the end of May.

Effective July 1, 2016, automatic extensions will no longer be available related to the filing of Forms W-2, except Forms W-2G. This change will impact forms related to the calendar year ended Dec. 31, 2016, that will be filed in early 2017. Employers will still have the opportunity to file a request for a non-automatic 30-day extension, but the IRS has stated it will only grant this non-automatic extension in limited cases where the need for the extension of time results from extraordinary circumstances or catastrophe. In the event the IRS does not grant the extension of time to file, information returns filed after their due dates are not timely filed, regardless of whether the application for extension of time to file was filed timely.

This change only relates to Forms W-2, but taxpayers and practitioners should be aware that the IRS has stated its intent to remove the 30-day automatic extension of time to file for many other information returns and forms over the next several years.

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