TN 5 (12-16)

RM 01101.003 The Internal Revenue Service and the Social Security Administration’s Combined Annual Wage Reporting (CAWR) Program

CITATIONS:

Act as amended, Sec. 232 and Sec. 205(c)(2)(A); Pub.L. 94-202;

20 CFR §422.114 Annual Wage Reporting Process,

69 FR 33690 Filed 6-16-04 Notice of Changes in Magnetic Media Filing Requirements for Form W-2 Wage Reports

A. Introduction to Combined Annual Wage Reporting (CAWR)

Under the authority provided by Section 232 of the Social Security Act, the Internal Revenue Service (IRS) and the Social Security Administration (SSA) signed an inter-agency agreement, a Memorandum of Understanding (MOU), that specifies how the CAWR process works. CAWR is a joint responsibility between SSA and IRS ensuring that employers pay and report the proper amount of taxes, as well as to ensure all Forms W-2 (Wage and Tax Statement), and W-3 (Transmittal of Wage and Tax Statement), or equivalent electronic reports are filed. SSA records earnings data to determine eligibility for, and to calculate and pay Retirement, Survivors, and Disability Insurance (RSDI) benefits. The IRS records earnings data to collect taxes from employees, self-employed individuals, and employers.

1. CAWR authorizations

The CAWR system authorizes the SSA and the IRS to:

  • enter into an agreement for jointly processing wage reports; and

  • share documents that are agreed upon as being necessary for purposes of implementing the annual wage reporting process.

2. Improving wage reporting

Significant ways IRS and SSA work to improve wage reporting:

  • periodically review the method and effectiveness of data exchange processes for any changes that will improve processing;

  • participate in employer workshops and payroll conferences; and

  • conduct a review process for all IRS forms and publications.

3. Data exchanges

SSA works with the IRS to provide automated data exchanges to improve:

  • wage reporting;

  • reconciliation; and

  • name and Social Security number (SSN) discrepancies (when name and SSNs do not match our records).

NOTE: SSA will maintain all federal tax returns and return information (FTI) received from the IRS in accordance with the Internal Revenue Code (IRC) section 6103(p)(4) and also comply with all additional Federal safeguards required by IRS Publication 1075 (Tax Information Security Guidelines for Federal, State, and Local Agencies).

B. IRS and SSA responsibilities for processing wage and tax reports

The MOU identifies each agency’s responsibilities to ensure that employers, submitters, and self-employed individuals pay and report the correct amount of income tax to the IRS, and file all of the necessary wage and tax reporting forms with SSA. SSA processes wage and tax reporting forms to update our earnings records and IRS’ tax records.

1. Filing forms with SSA

Employers and submitters file the following forms with SSA:

  • Forms W-2 (Wage and Tax Statement),

  • Forms W-2c (Corrected Wage and Tax Statement),

  • Forms W-3 (Transmittal of Wage and Tax Statement),

  • Forms W-3c (Transmittal of Corrected Wage and Tax Statement).

2. Filing forms with IRS

Employers and submitters file the following forms with IRS:

  • Forms 941 (Employer's Quarterly Federal Tax Return),

  • Forms 943 (Employer's Annual Federal Tax Return for Agricultural),

  • Forms 944 (Employer's Annual Federal Tax Return),

  • Schedule H (Household Employment Taxes, Forms 1040).

NOTE: Employers and submitters reporting for employees in Guam, American Samoa, the U.S. Virgin Islands, Puerto Rico, and the Commonwealth of the Northern Mariana Islands file adaptations of these forms.

3. Wage reporting filing requirements

IRS requires employers and submitters to file:

  • Forms W-2 and W-3 annually with the SSA on or before January 31st if filing electronically or on paper in the year following the wage reporting year. Note: Employers may request a single non-automatic extension of time to file Forms W-2 with the SSA by sending IRS Form 8809, Application for Extension of Time To File Information Returns, to the address shown on Form 8809. The extension will apply only to extraordinary circumstances or catastrophe.

  • Electronically, if filing 250 or more Forms W-2 or W-2c unless the IRS grants the employer a waiver. Employers can request a waiver from this requirement by filing Form 8508, Request for Waiver From Filing Information Returns Electronically, by submitting Form 8508 to the IRS at least 45 days before the due date of Form W-2, or 45 days before filing the first Form W-2c.

NOTE: We encourage employers to file electronically even if they are filing fewer than 250 Forms W-2 or W-2c. SSA no longer accepts filing of non-paper physical (magnetic) media such as tapes, cartridges, and diskettes.

C. Correcting previously processed wage reports

The W-2c corrections process is the primary method for correcting errors on wage reports that have already been submitted and processed. Employers and submitters should file a Form W-2c with a Form W-3c, as soon as they discover an error on their wage report. Also, employers and submitters should provide a copy of the Form W-2c to the employee as soon as possible.

D. Reconciling SSA and IRS wage and tax information (records)

The IRS and SSA Reconciliation Process electronically compares the employer's earnings report data processed by SSA with the employer's tax report data processed by IRS, matching the reports by the Employer Identification Number (EIN) and Tax Year (TY), to determine if the reports agree. If wage data processed by SSA is less than the amount reported to IRS (by more than the amount of one quarter of coverage for the tax year), we assume that the processed earnings are incorrect, and ask the employer to explain and resolve the differences. For more information on Reconciliation, see RM 02061.000.

E. References

For a complete listing of current wage and tax reporting forms, please visit IRS Forms and Publications.

For more information on Employer Wage Reporting, please visit SSA’s web site, Employer W-2 Filing Instructions & Information.

For more information on the CAWR process, see RM 01101.001B.2.

For more information on Reconciliation, see RM 02061.000.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0101101003
RM 01101.003 - The Internal Revenue Service and the Social Security Administration’s Combined Annual Wage Reporting (CAWR) Program - 12/20/2016
Batch run: 12/20/2016
Rev:12/20/2016