Preparing W-2s – Part 2: Confirm That it All Adds Up!

As the year draws to a close, another important step in preparing for year-end is reconciling your totals. Ideally, you should be reconciling your 941s each quarter before they are submitted to ensure accuracy. This not only helps confirm that your quarterly filings are correct, but also makes your year-end W2 process much smoother.

When reconciling your 941, you’ll want to go beyond simply verifying the totals. It’s important to double-check that your Federal wages, Social Security wages, and Medicare wages are accurate based on your pretax deductions.

Here’s a quick reference for how these should calculate:

• Federal Taxable Wages = Gross Wages – IPERS Withheld – IRS 125 Deductions – 403(b) Deductions

• Social Security and Medicare Taxable Wages = Gross Wages – IRS 125 Deductions

Your payroll software should provide reports with these totals, allowing you to easily perform these calculations and confirm that your 941 is accurate. Catching errors early can save time and prevent extra work later.

Each district may have some unique factors to consider, such as group term life (GTL), payment in kind (PIK), worker’s compensation payments or student employees that may be exempt from social security and Medicare withholding.  Once you understand what should go into your calculation, the reconciliation process becomes straightforward. To make this easier going forward, consider creating a spreadsheet to track these figures each quarter. This not only helps confirm your 941 totals, but also makes it simple to match them against your W2s at year-end. (Please reach out if you’d like a sample template.)

Before generating your W2s, take a moment to review the IRS guidelines and confirm that all deductions are reporting to the correct W2 boxes. Once your W2s are generated, it’s time to reconcile your totals to ensure everything matches. You will need your four quarterly 941 reports and your W2 Totals Report.

Here’s what to check:

1. Federal Totals: Add the numbers from Line 2 – Wages, Tips, and Compensation on all four 941s and compare the total to Gross Wages on your W2 Totals Report.
   

2. Tax Lines: Repeat this process for Lines 3 through 6 to confirm that Federal Tax Withheld, Social Security Wages, Social Security Tax, Medicare Wages, and Medicare Tax all match between your 941s and your W2 totals.
   

3. State Totals: Verify that your total State Tax Paid matches the amount shown on your W2 Totals Report.
   

4. Pretax Deductions: Check that totals for 403(b), IRS 125 deductions, and other pretax items all align with your reports.
   

If you find any discrepancies, correct them and regenerate your W2 report. Do not print your W2s until you are confident that all figures are correct.

Reconciling your totals may take some time, but ensuring accuracy now will make year-end reporting smooth and stress-free.