Accounting Best Practices, Fifth Edition

17–12. Issue Electronic W-2 Forms to Employees

A large company can experience some difficulty in issuing W-2 forms to its employees if they are distributed over a wide area. The mailing cost of this distribution can also be quite expensive, especially if the employer wants proof of receipt, which calls for the use of more expensive overnight delivery services. This problem can be avoided by issuing electronic W-2 forms to employees, thereby avoiding all related postage costs.

The IRS has issued specific regulations for the use of electronic W-2 forms. First, employees must give their consent to the receipt of an electronic W-2 form, and do so electronically, thereby showing proof that they are capable of receiving the electronic format in which the W-2 form will be sent. Second, the W-2 forms must contain all standard information that would normally be found on a paper W-2 form. Third, employees must be notified that the forms have been posted on a Web site for their access, and give them instructions on how to access the information. Finally, the access must be maintained through October 15 of the year following the calendar year to which they relate.

These regulations are not difficult to meet, and the use of a central Web site for storage of the information also allows the employer to determine precisely which W-2 forms have been accessed. However, it is likely that some employees who either have minimal access to computers or who are not computer literate will not access their ...