Reconciliation of Forms W-2

Policy:

F/EA reconciles the Year-End Payroll Journal Summary report for the calendar year provided by the payroll department to forms 941 for the calendar year. This reconciliation is performed between January 1 and January 31 of the year following the calendar year for which forms W-2 are produced.

Due to the large number of workers paid by F/EA, Forms W-2 must be filed electronically with the Social Security Administration (click here for instructions from the SSA). As a result, Form W-3 is not required and a reconciliation of form W-3 is not meaningful. The reconciliation of forms W-2 to the quarterly 941 filings meets the requirement to reconcile both W-2 and W-3 information returns.

The complete reconciliation process is the result of 4 segregated processes. A single individual does not control the entire process.

Enter Weekly Tax Amounts from payroll reports, performed weekly
Reconciliation of FICA and FIT Returns (941) and Payments, performed quarterly
Reconciliation of FICA, FIT and SIT payment to General Ledger, performed monthly
Reconciliation of Year End Payroll Journal Summary report to Forms 941 for calendar year, performed annually

This reconciliation is performed to ensure that the F/EA is submitting forms W-2 for the correct amount of wages, FICA, Federal Income Tax, and Earned Income Credits as reported to the IRS on form 941 and State Income Tax. This reconciliation is also performed to ensure that payments have been accurately made for income tax and FICA withheld from workers wages.

After performing the reconciliation, a reconciliation statement is prepared by the <<Staff Title>> (or assigned staff). It is then verified and reviewed by <<Staff Title>> (or assigned staff) who signs the bank statement, and stored at <<File Path>> Signed reconciliation sheets are stored per Retention Policy for a minimum of 7 years.

Procedure:

Reconcile Forms W-2 Payroll Journal Summary to Forms 941

Performed Annually between January 1 and January 31

1. <<Staff Title>> (or assigned staff member) obtains Year End Payroll Journal Summary Report from payroll department

This report shows wages, workers Social Security tax, workers Medicare tax, Federal withholding tax, Earned Income Credit, state wages and state withholding tax for each workers paid in the calendar year.

2. <<Staff Title>> collects receipt from payroll department showing that the electronic file of forms W-2 was submitted to the Social Security Administration via Business Services Online by March 31

Receipt is scanned to <<File Path>>
Receipt is stored for a minimum of 7 years per File Retention Policy

3. <<Staff Title>> collects reconciled Forms 941 for the calendar year

4. A pre-numbered reconciliation sheet is used for this reconciliation

<<F/EA should create a reconciliation sheet that to compare 941 amounts to amounts actually paid throughout the year. F/EA should also reconcile Form 941 to Schedule B and Schedule R. Create a process and insert that process here.>>

5. <<Staff Title>> prints the reconciliation sheet

6. The <<Staff Title>> reviews the sheet and verifies that all entries and mathematical calculations are correct.

7. After verifying, the <<Staff Title>> signs and dates the reconciliation sheet.

8. <<Staff Title>> reviews all documents for completeness and mathematical accuracy.

9. After verifying, <<Staff Title>> signs and dates the reconciliation sheet.

10. <<Staff Title>> stores this reconciliation sheet by scanning it to <<File Path>>

Internal Controls:

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

The methods of internal control utilized by F/EA are:

Each of the supporting documents are reviewed for mathematical accuracy by each verifier
Each reconciliation document is prenumbered
Each party initials and dates each reconciliation document displaying confirmation of their review
All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for account reconciliations