What is the IRS W-3 Form? And do I need to file it?

Today, we’re talking about Internal Revenue Service (IRS) Form W-3, the Transmittal of Wage and Tax Statements. 

From the moment a new employer hires their first employee, a whole new world of payroll logistics, IRS tax statements, and other new responsibilities opens up. While hiring your first employee is an exciting time—your business is growing!—it’s important to get a handle on your new responsibilities, including understanding the nuances of W-3 forms. 

That said, we know that some of those responsibilities can seem daunting. Interpreting tax statements, including Form W-3, doesn’t come naturally to many small business owners, and the IRS website isn’t all that helpful either (#noshade).

That’s why we’re simplifying and explaining everything that new (and even the most seasoned) small business employers alike should know about IRS Form W-3, including:

  • What the W-3 form is
  • How the W-3 form differs from other tax statements 
  • Why the Social Security Administration (SSA) and IRS require employers to file it
  • How to know if you need to file a W-3 form
  • When and how to submit a W-3 form

What is a W-3 form?

So, what is a W-3 form? Form W-3 is a document used by the IRS and the Social Security Administration (SSA) to summarize and transmit an employer’s W-2 forms. A W-3 form reports the total employee wages, taxable wages, and taxes your business withheld throughout the year. 

If you just need the TL;DR, here are the main points to know about Form W-3:

  • What’s reported on Form W-3: Total employee wages and taxes withheld
  • When it’s filed: Annually
  • Who needs to file: Most employers in the U.S.
Example of an IRS W-3 Form

How is Form W-3 different from Form W-2?

Forms W-3 and W-2 report much of the same information, and every employer who’s required to file one or more W-2 forms must also file a W-3 form. 

The key difference is that Form W-2 reports information like total wages and taxes withheld for each individual employee. A W-3 form, by contrast, reports the total employee wages, taxable wages, and tax withheld. For example, if you have three employees, you’d calculate and report the total of their combined wages and taxes on your annual W-3 form. 

The primary purpose of a W-3 form is to act as a “cover sheet” for your W-2 forms in order for the IRS and the SSA to keep track of all the employee wages paid, income, and Federal Insurance Contribution Act (FICA) taxes withheld by an employer.

What are withholding and FICA taxes?

So maybe you’ve heard of income tax withholding and FICA taxes, but are you totally clear on what they are? If the answer is “Nope,” (no worries!) let’s take a step back and explain.

When it comes to payroll and employment taxes, there are two main types of tax:

  • Withholding taxes: These are the taxes you withhold from your employee’s pay, and they include both the standard income tax and the employee’s portion of FICA taxes. It’s your job to withhold these taxes and deposit them with the appropriate tax authority. These are part of what’s reported on a W-3 form.
  • Employer taxes: As the name implies, you, the employer, pay the entirety of these taxes.

Income taxes represent the largest portion of the IRS tax base. FICA taxes, on the other hand, pay into Social Security and Medicare within the SSA.

What’s included in a W-3 form? 

A W-3 form details, among other information:

  • Total wages, tips, and other compensation paid out to all employees by an employer
  • The total portion of wages and tips subject to Social Security and Medicare (aka FICA) taxes
  • The total tax (including federal, state, and FICA) withheld from that pay

The IRS and SSA use Form W-3 to track the employee wages, salary, commission, tips, and other compensation employers pay out throughout the year.

Do I need to submit a W-3 form?

If you’re required to file one or more W-2 forms for employees, then you must also file a W-3 form with the SSA. You’re required to file both Form W-2 and Form W-3 if you:

  • Withheld any income, Social Security, or Medicare tax from employee wages
  • Paid $600 or more in wages (even if you did not withhold any income), Social Security, or Medicare tax

Do I need to send a W-3 form to employees?

Here’s an easy answer for you (yay!): No. Employers are required to send each employee their respective W-2 form by January 31 of each year—but they do not send a W-3 form to anyone other than the SSA.

How do I submit a W-3 form? 

Employers have a few options to choose from when the time comes to submit Form W-3:

  • E-file online
  • Mail in your form
  • Work with an accountant to file for you

Note: Employers who need to file more than 10 W-2 forms in a year must e-file Form W-3 online as of 2022.

Submitting Form W-3 to the government

E-file online

According to the SSA, e-filing is faster, more accurate, and more secure (sounds like the easy choice to make, if you ask us). 

To file Form W-3 online, you’ll use the SSA’s Business Services Online (or BSO) portal. Using the BSO portal, you’ll have two options for filling out Form W-3:

  • Create a fill-in version of the form and print out copies to submit OR
  • Upload wage files from your tax or payroll software (BSO will automatically generate the corresponding Form W-3).

When it comes to paying your annual withholding and FICA tax balance and making deposits online, you can use the Electronic Federal Tax Payment System (EFTPS).

If you choose to work with a tax professional or tax software (like Wave!), the IRS recommends making your payments via Electronic Funds Withdrawal (or EFW). This option allows you to e-file and authorize payment with one step.

Mail in your form

While the SSA prefers employers to file online, small businesses also have the option to mail in Form W-3 along with all of their W-2 forms and corresponding tax payments.

Before mailing in your form and payment, you’ll need to order paper copies of Form W-2 and W-3 from the IRS. Note: these forms cannot be downloaded from the IRS website and then mailed in—you have to order paper copies from the SSA.

Once you’ve ordered and filled out the forms, you can mail them to the address listed below (as well as on page 6 of the Instructions for Forms W-2 and W-3):

Social Security Administration

Direct Operations Center

Wilkes-Barre, PA 18769-0001

If you need to send the forms overnight to make the deadline (typically via private carriers like Fedex or UPS), you’ll need to send them to this address instead:

Data Operations Center

ATTN: W-2 Process

1150 E. Mountain Drive

Wilkes-Barre, PA 18702-7997

Work with an accountant to file for you

The last option small business owners have for filing Form W-3 and any outstanding payments or deposits is to work with a tax professional, like Wave Advisors, who can handle both the filing and depositing for them. Both of these are often done via the Electronic Funds Withdrawal (EFW) system referenced previously.

When to submit a W-3 form

Form W-3 is an annual filing, so the IRS and SSA require employers to fill out and submit it once each year. The annual deadline for filing Form W-3 (along with all corresponding W-2 forms) is January 31.

Keep in mind: You’re also required to send copies of W-2 forms to your employees by the same deadline.

How to fill out a W-3 form

Okay, the “what,” “why,” and “how” of W-3 forms has been covered, so now let’s get into what information you’ll need on hand to actually fill this thing out. In order to fill out Form W-3, you’ll need to have this information at the ready:

  • Your business details, including your federal employer identification number (EIN), legal address, and other contact information
  • Total wages (salary, tips, commission, and other compensation) paid to employees over the year
  • Total taxable wages for Social Security and Medicare
  • Total income tax withheld, both federal and state
  • Total Social Security tax withheld
  • Total Medicare tax withheld

The good news is that most payroll systems (including Wave!) keep track of all of this information for you. When tax time arrives, you can quickly and easily pull up these details and more.

W-3 Form: Key takeaways 

Phew—we covered a lot about Form W-3 and IRS tax statements in general today. For quick reference, here are the main points small business owners like you need to know:

  • A W-3 form reports the total salary and wages paid to all of your employees, along with total income and FICA taxes withheld throughout the prior year
  • Every employer who files one or more W-2 forms must also file Form W-3
  • Employers who need to file more than 10 W-2 forms in a year must e-file Form W-3 online as of 2022 through the SSA’s BSO portal (although it’s recommended that all employers do)
  • Paper copies of the form can be ordered on the IRS website for any employers not filing online 

Now that you’re armed with everything you need to know about W-3 forms, we hope tax season is a little less stressful. You can always save this article and come back to it later if it’s too much to absorb right now. Don’t worry, we’ve got your back!