This article will address what is Form W3 and how it is applicable to the Employee Retention Credit. The W3 is one of the documents a business uses to fill out the Form 941 x to help in determining your eligibility for the ERC.
Why is the IRS Form W3 Helpful for ERC
When starting a new business you must hire employees to help with operations. However, with employees comes the complicated payroll and taxes applied to employee wages.
Navigating the IRS’ tax requirements can be difficult, to say the least. The IRS W3 Form can appear to be complicated and difficult to manage. Yet, you don’t have to be too concerned. This form is very helpful in retrieving the proper information if following the W-3 instructions.
As of 2020, the pandemic caused many businesses to partially or fully shut down. But the ones that remained and managed to retain most employees can now apply for ERC benefits through Form 941X.
As many of these forms overlap, it is common for businesses to ask whether you need to fill out the IRS W3 Form for ERC benefits.
The main problem with handling employee payroll systems is not the paying of wages but what comes after.
So what is the difference between W2 and W3?
The W3 Form comes in handy because it reports combines company income. This is helpful when determining W2 employees total wages paid.
W2 is strictly for each individual employee.
It is difficult to interpret IRS tax forms for small business owners. Unlike specialists who have spent years working with and studying the forms, small business owners may find it hard to navigate the complicated structure.
If your business needs help navigating the Employee Retention Credit process we can help to get your questions answered and even conduct a complimentary pre-qualification check to review your eligibility status.
What is Form W3?
Here’s everything you need to know about the IRS W3 Form:
- A W3 form is usually used to understand and summarize the information included in the W2 form. While a W2 form might include detailed information about each employee, the W3 form will let you know the total amount.
- It is usually needed for companies reporting the total wages, taxable portion of the payroll, and other taxes during the year.
- You must file the W3 form annually.
Important Terms Regarding the W3 Form
The following terms are necessary to be understood if you are working on the IRS W3 Form:
- Withholding taxes: Keep in mind that withholding taxes are the part of your employee’s income that you withhold. This is used to pay their income taxes. This amount is reported on the W3 Form.
- Employer Taxes: These are the taxes you must pay to the IRS.
Remember that the W3 Form is useful if you want to understand the total wages you paid to your employees, any financial benefits, the amount allocated to taxes, and further breakdowns based on Medicare (FICA taxes) or Social Security taxes.
The Correlation of the W3 Form and Employee Retention Credit
The IRS W3 Form and the ERC work in different ways. While the W3 form is used to report all of the taxes that you need to file with the IRS, the ERC is used to apply for credits based on those taxes.
The W3 form is one of the required documents to help you file the ERC, as all of the W2 information you need to report will be included.
If you are looking to apply for the ERC, the relevant form is 941X. This updated form allows businesses to apply for ERC if they failed to do so in previous years.
If you receive approval for ERC, your tax burden can be significantly reduced. Thus, you will need to submit a lower percentage of the taxes deducted from employee wages in turn bringing you a tax credit.
Difficulties Filing Employee Retention Credit
It is becoming significantly difficult to keep up with IRS requirements. Small businesses are getting more confused regarding the requirements and eligibility. The regulations have changed causing confusion in the filing process.
Other items like owner’s wages, gross receipts, and government shutdown can all further complicate your ERC application.
This hurdle can be overcome, especially with the use of an ERC specialist who can guide you through the application process and submit your amended returns expeditiously and accurately.
Their experience allows even the most complicated entries to be filled out efficiently. Moreover, you save time which can be invested in other business decisions.
If you want assistance applying for the Employee Retention Credit, FTCO ERC could gladly assist you.
Please fill out this complimentary pre-qualification today and get our expert help for the best ERC benefits.
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W3 Form – First Step to Your ERC Refund
For a business that struggled through the pandemic, benefits can help keep finances afloat. Retaining employees during the pandemic was hard for most small business owners.
Since the IRS offered many owners the opportunity to compensate for their losses, why shouldn’t you take advantage of the opportunity?
If you are worried about the complicated process and potential errors, you can trust FTCO ERC to get the job done correctly. Shift that burden and delegate your ERC benefits filing to us.
We wish you the greatest success in acquiring the refund your business deserves.