Upon receiving your quarterly data, the Tax Service compares the quarterly totals of your company to the accumulated tax amounts received with each payroll. The Tax Edit W-2 Analysis, also called the W-2 Edit Report, is an internal report used by your Tax Service Representative that compares these totals for each tax code set up on your Client Master File.
The Tax Edit W-2 Analysis, also called the W-2 Edit Report, is used by your Tax Service Representative to compare these totals for each tax code set up on your Client Master File. Should situations arise in regards to variances in your totals, you may be sent a copy of the W-2 Edit Report to aide in resolving these discrepancies.
What causes a variance?
Common causes of variances include:
SUI State Unemployment Insurance rate changes - Experience rates that change at the Tax Service after you process your last payroll of the quarter can result in a tax variance. The payroll process did not have an opportunity to recalculate the tax and transmit the adjustment to the Tax Service.
Moving an employee - Correcting an employee's jurisdiction coding can result in a tax variance in both the jurisdiction the employee was moved from and the jurisdiction to which the employee was moved. Customers who use Balance As You Go (BAYG Balance As You Go) provide the Tax Service with information on employee movements as they are processed, thereby significantly reducing quarter-end variances.
Quarter-to-date adjustments - The tax filing system does not recognize quarter-to-date adjustments until the quarter is closed and final payroll quarterly wage and tax figures appear on quarter-end payroll reports. Customers who use Balance As You Go (BAYG) provide the Tax Service with information on quarter-to-date adjustments as they are processed, thereby drastically reducing quarter-end variances.
Missing mid-quarter/mid-year data - If you started with the Tax Service after the first payroll of the quarter or in the second, third, or fourth quarter of the year, missing payroll data could cause variances. Refer to the Start-Up procedures chapter for more details on mid-quarter/-year information.
Fallout - Adding a tax code to your Client Master File during the quarter-end processing to accommodate quarterly data can cause variances. The Tax Service has not received tax data or funds during the quarter to reconcile to the quarterly total. Contact your Tax Service Representative as soon as your company or employees become responsible for paying taxes in a new jurisdiction.
Using the W-2 Edit to recognize Year-to-Date variances
The W-2 Edit Report also compares the combined total of your quarterly returns to the year-to-date totals from your payroll. A variance in the year-to-date totals might be caused by year-to-date adjustments. The Tax Service does not receive the year-to-date adjustments as you process them. Only the net result is received at quarter or year-end.
These variances may be an indication that amended returns are in order. A variance may also occur if an amendment that has already been made within the same year because your year-to-date totals would include the adjustments you process through payroll, while the Tax Service totals may not. By recognizing the variance amount as the amended figure, the variance is validated and no further steps are needed.
Variance notification
A copy of the W-2 Edit Report is mailed to you for review and authorization. If the variances are valid, sign and return the report to your Tax Service Representative to indicate your authorization of the data.
If the data is incorrect (for instance because of an adjustment processed since the date of the report), contact your Tax Service Representative to determine what action is needed to correct the variance.
Minimizing variances
A variety of steps can be taken to minimize variances, such as:
Using Balance As You Go (BAYG) to be notified of variances as they occur
Updating rates in a timely manner
Following the adjustment guidelines
Moving an employee to a new jurisdiction before they accumulate additional earnings in the prior jurisdiction
Immediately notifying the Tax Service of new tax codes
Funding for variances
If a large variance is detected between your per pay period totals and quarterly totals, it may result in additional taxes due. In this case, the Tax Service will make arrangements to collect the additional money from your account before making the final deposit for the quarter.
For example, assume your per pay period Federal Income Tax total is $50,000 and your quarterly total is $59,000. Through research, you determine that the quarterly total is correct and that the $9,000 variance was due to a quarter-to-date adjustment made during the quarter. Before depositing the additional $9,000 due in FIT Federal Income Tax, the Tax Service will make arrangements to collect the funds from your account.
Any additional tax due as the result of a quarter-end variance may result in late payment penalty and interest assessments for which your company will be responsible.