W-2 Reconciliation Guide

This comprehensive guide will help you ensure accurate W-2 reporting and avoid costly compliance issues when preparing year-end tax documents in Avionté.

Why W-2 Reconciliation Is Critical

Whether you're new to Avionté or have been using the system all year, thorough W-2 reconciliation is essential for accurate tax reporting. Data entry errors, configuration issues, or system transitions can lead to serious consequences including incorrect W-2s, tax filing errors, employee frustration, and potential IRS or state penalties. Since W-2s are legal tax documents, employers remain responsible for their accuracy regardless of the software used.

A comprehensive W-2 reconciliation process ensures that employee wages, taxes, and deductions are reported correctly, year-to-date values are accurate, and errors are caught before forms are filed with the IRS or distributed to employees.

Guide Contents

1. Getting Started: Preparation and Documentation
2. Verifying Your Avionté System Configuration
3. Reconciling Wages and Tax Withholdings
4. Quality Assurance and Final Steps

Getting Started: Preparation and Documentation

Before beginning your reconciliation, gather these essential documents and reports from your payroll records:

Required Documentation:

• Payroll tax returns (W-2s, 941s, state withholding tax returns, local tax returns)
• Comprehensive tax reports showing federal, state, and local wages and taxes

Having complete documentation is crucial for accurate comparison and validation of your year-end totals.
 

Verifying Your Avionté System Configuration

Proper configuration of your Avionté system is essential for accurate W-2 reporting. Use Avionté’s Transaction Type Configuration Verification AQ to complete these validations:

System Configuration Checklist:

• Verify all benefits and deductions are set up correctly. Confirm employer contributions are properly configured
• Review federal, state, and local tax settings
• Ensure all tax EINs and state account numbers are accurate
  • Confirm all states with payroll for the year. If any are missing, Generate Feed & XML for Q4 in Weekly process and then review again.
• Validate transaction type settings (pre-tax, post-tax, retirement, Unit to Hours multipler)
  • For example, pre-tax vs after tax by reviewing the Vertex Deduction Code
• Check that W-2 box and label fields are properly mapped to the correct fields on the Form W-2
• Review Greenshades properties in Admin Tools > Employer > Details tab.
  • GS_Company_CompanyID: This is your registration key from Greenshades and is unique to your organization.  You must have it entered to use Greenshades.
  • Contact Information: GSXMLFeed_Contact_XXXXXXXX
    • There are fields for name, email address, phone number
  • Review this guide for a list of properties for review.

Take time to review these settings, as errors here will affect your entire W-2 generation process.
 

Reconciling Wages and Tax Withholdings

Use Avionté's Taxes Summary AQ report to perform these critical validations:

Key Reconciliation Steps:

• Review year-to-date totals for accuracy
• Verify pre-tax deductions are properly calculated
• Confirm employer contributions are correctly recorded
• Cross-reference totals with your quarterly 941 filings

Any discrepancies found during this phase should be investigated and resolved before proceeding to W-2 generation.
 

Testing Your W-2 Generation

Before generating final W-2s, run comprehensive tests using Avionté's reporting tools:

Testing Process:

1. Generate preliminary W-2 reports in Avionté
2. Create the feed and XML for Q4 using the Weekly Process
3. Address any data errors that appear during generation, using the Greenshades Common Errors guide
   1. For example, if you get errors about missing SOC codes, please resolve this error by adding missing SOC codes using our guide.
4. Select a representative sample of employees for detailed review
    

Choose Test Employees Representing:

• Hourly workers
• Salaried employees
• Commission-based or bonus recipients
• Employees with pre-tax deductions
  • Employees participating in retirement plans
  • Employees with health insurance benefits
• Employees with taxable benefits
• Multi-state and local jurisdiction employees
  • Employees in states with PFML-required programs
• Employees who moved, changed states, or modified benefit elections
• Employees paid third party sick pay
   

Detailed Box-by-Box W-2 Reconciliation

Use Avionté's Taxes Summary AQ and Get Fed W2 Details with Box Totals reports for this detailed verification:

Box 1 - Wages, Tips, Other Compensation

Ensure pre-tax deductions (health insurance premiums, 401(k) contributions, commuter benefits) are properly subtracted from gross wages. Add back any taxable fringe benefits, such as group-term life insurance over $50,000.

Box 2 - Federal Income Tax Withheld

Verify this amount matches your payroll records and quarterly 941 filings.

Boxes 3 & 5 - Social Security & Medicare Wages

Confirm Social Security wages in Box 3 are capped at the annual wage base limit. Medicare wages should include all wages subject to Medicare tax.

Boxes 4 & 6 - Social Security & Medicare Tax Withheld

Calculate expected withholdings: multiply Box 3 wages by 6.2% (Social Security) and Box 5 wages by 1.45% (Medicare) to verify amounts match reported taxes.

Box 12 - Employee Benefit Codes

Common codes to verify:

• Code D: 401(k) plan deferrals
• Code E: 403(b) plan deferrals
• Code W: Health Savings Account contributions
• Code AA: Designated Roth contributions (401K Roth and 403B Roth, for example)
• Code DD: Employer-sponsored health coverage

Box 13 -

•  Retirement Plan: checked if employee was “active participant” in 401(k), 403(b), 457 plan, pension plan, profit-sharing plan, or SEP-IRA
• Third Party Sick Pay: checked when sick pay was paid by a third party (not the employer)

Box 14 - Other Deductions

Examples include state disability insurance (CA SDI, NJ TDI, NY DBL) and state paid family medical leave contributions.
 

State and Local Tax Sections

Ensure state wages and taxes (Boxes 16-18) align with payroll records and meet state-specific requirements.
 

Employer Information Verification

Confirm the accuracy of your Employer Identification Number (EIN) and verify your legal name and address are correct.
 

Quality Assurance and Final Steps

Final Review Process:

• Identify and investigate any red flags or unusual discrepancies
• Document all issues found and their resolutions
• Re-generate W-2 reports after making corrections. Regenerate Greenshades Feed & XML as needed until reports are accurate.
• Complete a full re-verification of corrected data
   

Audit and Validation:

• Conduct a final employee-level reconciliation
• Validate totals against IRS Forms (quarterly 941s)
• Retain all supporting documentation for audit purposes
   

Year-End Completion

After processing your final payroll of the year:

Final Steps:

• Lock in year-end totals to prevent accidental changes.
  • This can be done in Weekly Process by flagging the quarter as complete. Confirm all tax filings, not just the W-2s, are accurate prior to completing this step. Completing this step may also post your W-2s to the talent portal, so ensure you are ready to distribute your W-2s.
• File W-2s with the SSA and appropriate state agencies
  • W-2s that require correction after submission may require a W-2C to be filed with the SSA
• Distribute W-2s to employees by the January 31st deadline
• Preserve year-end files for future audits and reference
   

Need Additional Support?

If you encounter issues during your W-2 reconciliation process, our support team is here to help.  Please create a ticket in the Support Cetner for review by our Support agents.