TN 4 (03-16)
RM 01101.001 Employer Wage Reporting Process
Citations: Act as amended,
Sec. 232, and Sec. 205(c)(2)(A);
20 CFR §422.114
Annual Wage Reporting Process
69 FR 33690 Filed 6-15-04 Notice of Changes in Magnetic Media Filing Requirements for Form W-2 Wage Reports
A. Introduction to wage reporting
SSA receives, processes, posts and maintains earnings information for the nation's workers. Each year employers, on behalf of their employees, and submitters report wages to SSA. Accurate earnings information is necessary to ensure that we credit the correct amount of earnings to the correct individual’s earnings record. We use the employer submitted Form W-2 (Wage and Tax Statement) and W-3 (Transmittal of Wage and Tax Statement), and self-employment earnings data from the IRS to determine eligibility for and the amount of Social Security benefits to which the worker may be entitled.
NOTE: Self-employed individuals report their income and tax liability to the Internal Revenue Service (IRS). IRS processes the reports and transmits the net income to SSA for posting to our records.
B. History of wage reporting
1. Prior To January 1, 1978
Prior to January 1978, Department of Treasury regulations required employers and submitters to file their wage and tax reports with the IRS on a quarterly basis:
Forms 941 (regular work);
Forms 942 (household work); or
Forms 943 (agricultural work); and
Forms W-2 (Wage and Tax Statement) and W-3 (Transmittal of Wage and Tax Statement).
Schedule A was included with Forms 941 and 943 showing the detailed amounts of wages for each employee by name, Social Security number (SSN), and the amount of wages paid to each employee for that quarter. Form 942 did not include the “Schedule A;” however, it contained the same information that was included in Schedule A. IRS sent SSA this information, and SSA used it to post wage information quarterly to each individual’s earnings record.
2. Beginning January 1, 1978
Congress directed IRS and SSA to implement the Combined Annual Wage Reporting (CAWR) program. The CAWR is a joint reporting responsibility between IRS and SSA that replaced the prior quarterly wage reporting process. It ensures that employers pay and report the proper amount of taxes, as well as to ensure all Forms W-2 and W-3 or equivalent electronic reports are filed. CAWR was enacted January 2, 1976, which provides for annual, rather than quarterly, wage reporting.
Employers and submitters began filing annual wage and tax reports with SSA beginning with the following tax years:
1978 for United States domestic employers (other than State and local governments)
1979 for employers in Guam, American Samoa, Virgin Islands, and Puerto Rico (other than State and local governments), and
1981 for State and local governmental employers.
C. Importance of accurate wage reporting
Employers are responsible for accurately reporting their wage and tax information to SSA. We are responsible for recording each worker’s earnings history for benefit purposes and processing earnings and tax information to transmit to the IRS.
Accurate wage reporting and recordkeeping are essential supports to:
SSA's retirement, survivors, and disability claims processes.
Maintain SSA's beneficiary rolls, which includes:
Annual earnings test and SSI income limitation enforcement activities;
Monitoring work activity by disability beneficiaries to detect the need for continuing disability investigations; and
Benefit recomputations and cost-of-living increase computations;
Trust fund accounting (We certify SSA processed wage totals with the Treasury Department, so that the amounts credited to the Social Security Trust Funds are supported by detailed earnings records, which we establish and maintain).
Retirement planning for workers, who can receive information about their earnings (and a future benefit estimate) from SSA's records upon request through the mailed earnings statements or by creating a my Social Security account online via our ssa.gov website to request an online statement.
Compliance with the nation's tax laws by assisting IRS in identifying employers who fail to comply with tax reporting responsibilities or who file erroneous reports.
Statistical data collection for significant economic and social science research by government entities, as well as private and public institutions.
Data matches with records of other governmental agencies to ensure program integrity and compliance with provisions of the Social Security Act or other Federal law (e.g. data matches with IRS, U.S. Citizenship and Immigration Service(USCIS)).
D. The content of SSA earnings records
SSA records contain the following:
Electronic and microfilm records of Federal Insurance Contributions Act (FICA) wage reports;
Electronic records of self-employment data provided by the Internal Revenue Service (IRS) from Schedule SE of income tax returns;
Non-FICA earnings for workers in non-covered employment; and
NOTE: The process of microfilming wage reports has been discontinued; however, SSA still retains the film from previous years for earnings information.
RM 01101.003 Information on the CAWR process.
RS 01801.010 and RS 01801.011, Information on self-employment.
Employer W-2 Filing Instructions & Information,information on Annual Wage Reporting.
IRS Forms and Publications, a current list of IRS forms and publications.