Sec. 174.2. Filing quarterly combined withholding and wage reporting returns

Tax Law, § 674(a)(4)

(a) Who must file.

(1) General.

(i) Wage payments. Every employer maintaining an office or transacting business within New York State and making payment of any wages taxable under article 22 of the Tax Law to a resident or a nonresident individual, whether or not such wages are sufficient to require the withholding of New York State personal income tax, and every employer required to file a wage reporting return pursuant to section 171-a of the Tax Law with respect to gross wages paid to at least one employee performing employment, whether or not such employee is a resident of New York State for purposes of the Tax Law and whether or not such wages are subject to withholding of New York State personal income tax or payment of New York State personal income tax under article 22 of the Tax Law, must file quarterly combined withholding and wage reporting returns in accordance with the provisions of this section. (Note: See Part 2380 of this Title for requirements relating to the filing of wage reports.)

(ii) Pension payments. Every payer of pensions, annuities, retired pay or IRA payments which are subject to New York State withholding shall be required to file quarterly combined withholding and wage reporting returns. (Note: Each such payer need not file the wage reporting portion of Part B of such returns, as described in subdivision [b] of this section, since the payments described in this subparagraph are not gross wages within the meaning of section 2380.4 of this Title.)

(iii) Gambling winnings. Every payer of gambling winnings from which New York State personal income tax was withheld shall be required to file quarterly combined withholding and wage reporting returns which shall be separate from such returns which include wage and/or annuity payments. (Note: Each such payer need not file the wage reporting portion of Part B of such returns, as described in subdivision [b] of this section, since gambling winnings are not gross wages within the meaning of section 2380.4 of this Title.)

(iv) The quarterly combined withholding and wage reporting return referred to in this section replaces form WRS-2, Employer's Quarterly Report of Wages Paid to Each Employee, and the New York State copy of forms IT-2102, Wage and Tax Statement,IT-2102P, Statement for Recipients of Annuities, Pensions, Retired Pay or IRA Payments, and IT-2102G, Report of Certain Gambling Winnings.

(2) Seasonal employers.

(i) General rule. An employer need not file either Part A or Part B of the quarterly combined withholding and wage reporting return for a calendar quarter (see subdivision [b] of this section) if such employer, due to the seasonal nature of its business:

(a) does not, during the calendar quarter, make payment of wages which are subject to New York State income tax withholding; and

(b) has not, during the calendar quarter, paid wages subject to unemployment insurance contributions, pursuant to article 18 of the Labor Law.

(ii) Special rule. Notwithstanding the provisions of subparagraph (i) of this paragraph, an employer described in such subparagraph must, on or before the due date prescribed by subdivision (c) of this section for filing the quarterly combined withholding and wage reporting return covering the last calendar quarter of the year, file the annual employee specific withholding reconciliation portion of Part B of such return. If such employer discontinues business or permanently ceases to pay wages during the calendar year, the annual employee specific withholding reconciliation information must be furnished on such employer's final quarterly combined withholding and wage reporting return on or before the due date prescribed by subdivision (f) of this section.

(3) Definitions.

(i) For purposes of this section:

(a) when the context indicates that the subject matter being referred to relates to the requirements for withholding New York State personal income tax, the terms “employer,” “employee” and “wages” shall have the meanings prescribed by Part 171 of this Title; and

(b) when the context indicates that the subject matter being referred to relates to wage reporting, the terms “employer,” “employment” and “gross wages” shall have the meanings prescribed by Part 2380 of this Title.

(ii) Except where otherwise specifically provided for, any reference in this section to “employer” shall be deemed to include reference to “payer” or where applicable, the New York State Division of the Lottery and any reference in this section to “employee” shall be deemed to include reference to “payee.”

(b) Contents of quarterly combined withholding and wage reporting returns.

(1) General.

Each quarterly combined withholding and wage reporting return shall consist of two parts: Part A, which shall detail the withholding tax transactions for the calendar quarter for which such quarterly combined return is being filed, and such other related information as may be required by the Department of Taxation and Finance in forms and instructions, and Part B, which shall detail employee name, employee identification number and gross wages paid for wage reporting purposes for the calendar quarter for which such quarterly combined return is being filed, and employee name, employee identification number and annual employee withholding reconciliation information for the calendar year, or a portion of such year if the employer ceased paying wages prior to the end of such calendar year, if applicable, and such other related information as may be required by the Department of Taxation and Finance in forms and instructions.

(2) Notwithstanding the provisions of paragraph (1) of this subdivision, a quarterly combined withholding and wage reporting EZ return (consisting of form WT-4AEZ and Part B) shall be filed where an employer has been required to deduct and withhold, but has not paid over to the New York State Department of Taxation and Finance, a cumulative aggregate amount of less than $700 of tax during a calendar quarter (see section 674[a][2] of the Tax Law and section 174.1[b][2] of this Part).

(3) The provisions of this subdivision and subdivision (a) of this section can be illustrated by the following examples:

Example 1:

During each calendar quarter of a calendar year, employer A employed the same 10 employees, all of whom are New York State residents for purposes of the Tax Law. All employees performed employment for A during each such calendar quarter. A was required to deduct, withhold and pay over New York State income tax during each calendar quarter for all of A's employees. A was also liable for unemployment insurance contributions pursuant to article 18 of the Labor Law during each such calendar quarter. A would be required to file a quarterly combined withholding and wage reporting return covering each calendar quarter consisting of Part A, the wage reporting portion of Part B (reporting gross wages paid to all 10 employees), and for the quarterly return covering the last calendar quarter of the year, the employee specific annual withholding reconciliation portion of Part B (reporting such withholding reconciliation information for all 10 employees). (Note: If the conditions described in paragraph [2] of this subdivision are met, then A must file A's quarterly combined withholding and wage reporting return using form WT-4AEZ and Part B for the calendar quarter or quarters in which such conditions are met.)

Example 2:

B employs a maid and a cook in B's home during each calendar quarter of a calendar year. The maid and the cook receive combined wages totaling $450 in each calendar quarter. The wages of the maid and the cook are excluded from withholding for Federal income tax withholding purposes and there is no such Federal withholding. B is not liable for unemployment insurance contributions pursuant to article 18 of the Labor Law and is therefore not required to file the wage reporting portion of Part B of the quarterly combined withholding and wage reporting return for each calendar quarter of the calendar year. Since the wages of the maid and the cook are not subject to Federal income tax withholding, they are similarly not wages for New York State personal income tax withholding purposes pursuant to Part 171 of this Article, and there is in fact no such New York State personal income tax withholding. Therefore, B need not file Part A of the quarterly combined return for each calendar quarter, and also need not file the annual employee specific withholding reconciliation portion of Part B included in the last quarterly combined withholding and wage reporting return for the calendar year.

Example 3:

Assume the same facts as in Example 2, except that the maid, in each calendar quarter, elects to have New York State income tax withheld. Therefore, B still need not file the wage reporting portion of Part B of the quarterly combined withholding and wage reporting return for each calendar quarter of the calendar year. However, since the wages paid to the maid are subject to New York State personal income tax withholding in each calendar quarter, B must, in each such quarter, file Part A of the quarterly combined return, and on the return covering the last calendar quarter of the calendar year, include the maid only in the annual employee specific withholding reconciliation portion of Part B.

Example 4:

During each calendar quarter of a calendar year, Employer C makes annuity payments to 50 payees, all of whom are New York State residents for purposes of the Tax Law. Such benefits are retirement benefits. Pursuant to Tax Law, section 671(b) and section 171.10 of this Article, 40 of such payees do not elect to have New York State personal income tax withheld from such annuity payments in each calendar quarter, leaving 10 of such payees who made the election and are, therefore, subject to New York State withholding. For wage reporting purposes, C is not required to file the wage reporting portion of Part B of the quarterly combined withholding and wage reporting return in each calendar quarter since all of the annuity payments do not qualify as “gross wages” within the meaning of section 2380.4 of this Title. C must complete Part A of the quarterly combined return in each calendar quarter, and must include information relating to only the 10 payees who opted for New York State personal income tax withholding in the annual employee specific withholding reconciliation portion of Part B of the quarterly combined return covering the last calendar quarter of the calendar year.

Example 5:

D pays gambling winnings subject to New York State personal income tax withholding in each calendar quarter of a calendar year (see section 171.11 of this Article). Such gambling winnings are not “gross wages” for wage reporting purposes pursuant to section 2380.4 of this Title. Thus, D need not complete the wage reporting portion of Part B of the quarterly combined withholding and wage reporting return in each calendar quarter of the calendar year. However, D will be required to file Part A of the quarterly combined return in each calendar quarter and to complete the annual employee specific withholding reconciliation portion of Part B of the quarterly combined return covering the last calendar quarter of the calendar year.

(c) Due dates for filing quarterly combined withholding and wage reporting returns.

The quarterly combined withholding and wage reporting returns referred to in this section shall be filed no later than the last day of the month following the last day of each calendar quarter, except that the quarterly combined withholding and wage reporting return covering the last calendar quarter of each year shall be filed no later than February 28th of the succeeding year.

(d) Quarterly combined withholding and wage reporting return of a governmental employer.

The quarterly combined withholding and wage reporting return of a governmental employer is to be made by the officer or employee controlling the payment of wages or other officer or employee appropriately designated for that purpose.

(e) Transmittal of quarterly combined withholding and wage reporting return.

Both Parts A and B of the quarterly combined withholding and wage reporting return referred to in this section must be filed together and sent to the New York State Department of Taxation and Finance.

(f) Final quarterly combined withholding and wage reporting return.

The last quarterly combined withholding and wage reporting return (Part A and Part B) for any employer who discontinues business or permanently ceases to pay wages subject to New York State personal income tax withholding and gross wages to persons in employment for purposes of wage reporting requirements must be marked “Final Return” and the date of the last payroll must be furnished by the employer. Such final quarterly combined return must be filed within 30 days of the date of the employer's last payroll and be accompanied by the remittance of the cumulative aggregate amount of tax required to be deducted and withheld, if any.

(g) Required or elective use of magnetic media for filing quarterly combined withholding and wage reporting return.

(1) Definitions.

For purposes of this subdivision:

(i) the term commissioner means the Commissioner of Taxation and Finance or his delegates;

(ii) the term department means the Department of Taxation and Finance;

(iii) the term machine-readable paper form means any machine-readable paper form, including optical scan paper form, as described by the department in instructions for use in complying with the requirements of this subdivision;

(iv) the term magnetic media means media, including magnetic tape, diskette, cassette and mini-disk, as described by the department in instructions for use in complying with the requirements of this subdivision; and

(v) the term person means any individual, trust, estate, partnership, association, company, corporation, governmental entity, or any other entity required to file a quarterly combined withholding and wage reporting return.

(2) Magnetic media filing.

(i) General rules.

(a) Any person required to include information relating to 250 or more individuals on Part B of the quarterly combined withholding and wage reporting return during each of the four calendar quarters preceding the current calendar quarter shall be required to commence filing Part B of such quarterly combined return using magnetic media.

(b) The department shall, each calendar quarter, provide written notification to all persons first meeting the provisions of clause (a) of this subparagraph. Each such person shall, at such time and in accordance with instructions contained in such notice, submit a test magnetic media tape or disk to the department which reflects the magnetic media specifications and format for filing Part B of such quarterly combined return. Upon successful test completion, the department shall provide certification to such person, and shall also inform such person of the first calendar quarter for which Part B of the quarterly combined return shall be filed using magnetic media.

(c) If, in accordance with this subparagraph, a person is required to file Part B of the quarterly combined withholding and wage reporting return with the department using magnetic media, then such person shall continue filing Part B of such quarterly combined return using magnetic media in subsequent calendar quarters, regardless of whether or not such person meets the 250 individual threshold prescribed in clause (a) of this subparagraph. However, if such person notifies the department in writing no later than 30 days after the start of a calendar quarter that such 250 individual threshold will not be met in such calendar quarter and that such person no longer wishes to file using magnetic media, then such person shall cease filing using such media.

(ii) Aggregation. An individual for whom wage reporting and annual withholding information is shown on Part B of the quarterly combined withholding and wage reporting return shall be counted once in determining whether the threshold prescribed by clause (a) of subparagraph (i) of this paragraph has been met.

(iii) Examples.

The provisions of subparagraphs (i) and (ii) of this paragraph can be illustrated by the following examples:

 

Example 1:

A employs the same 240 individuals during each calendar quarter of a calendar year. A is required to provide wage reporting information for all 240 individuals during each calendar quarter of the year. A must also provide annual employee specific withholding reconciliation information for all 240 individuals during the last calendar quarter of the year. A has not exceeded the 250 individual threshold referred to in clause (a) of subparagraph (i) of this paragraph during such last calendar quarter.

Example 2:

B receives written notice from the department during a calendar quarter that B exceeded the 250 individual threshold referred to in clause (i)(a) of this paragraph during each of the preceding four calendar quarters. B, in accordance with instructions contained in such notice, files a test tape with the department using the prescribed magnetic media specifications and format for filing Part B of the quarterly combined withholding and wage reporting return. Upon successful test completion, the department certifies the test tape and informs B of the calendar quarter in which B must begin filing Part B of the quarterly combined return using magnetic media. B must file using such media in subsequent calendar quarters even if B falls below the 250 individual threshold, unless B notifies the department, no later than 30 days after the start of the calendar quarter in which such threshold will not be met, that B no longer wishes to file using magnetic media.

(iv) Special paper returns. All persons required to file quarterly combined withholding and wage reporting returns, including those not required or not electing to file Part B of such return using magnetic media, shall file Part A of such return using the method prescribed by subparagraph (i) of (ii) of paragraph (3) of this subdivision, as applicable.

(v) Election to file using magnetic media. Any person not required to file Part B of a quarterly combined withholding and wage reporting return with the department using magnetic media may nevertheless elect to file Part B of such quarterly combined return using magnetic media by furnishing written notice to the department of such intention. Such person shall file the test tape or disk referred to in clause (b) of subparagraph (i) of this paragraph and shall not commence magnetic media filing of Part B of the quarterly combined return until the department certifies such test tape or disk and informs such person of the calendar quarter in which magnetic media filing may commence. A person electing to file Part B of the quarterly combined return may revoke such election by furnishing written notice thereof to the department no later than 30 calendar days after the start of the calendar quarter in which magnetic media is no longer intended to be utilized.

(vi) Instructions. A person required to file Part B of the quarterly combined withholding and wage reporting return using magnetic media pursuant to the provisions of this subdivision shall file Part B of such return in accordance with instructions promulgated by the department, and Part B of such return shall contain such information as the department shall specify in such instructions.

(3) Paper return filing.

(i) Use of prescribed New York State paper format. For calendar quarters in which the department does not impose the machine-readable paper form requirement referred to in subparagraph (ii) of this paragraph, any person not required or not electing to file Part B of a quarterly combined withholding and wage reporting return using magnetic media in accordance with the provisions of paragraph (2) of this subdivision, and any person filing Part A of a quarterly combined withholding and wage reporting return, must file Parts A and B of such return for the calendar quarter using the prescribed New York State paper format. No substitutes will be accepted by the department in satisfaction of this filing requirement unless such substitute is specifically approved for use by the department at least 45 days before the due date of the applicable return.

(ii) Use of machine-readable paper filing. Any person not required or not electing to file Part B of a quarterly combined withholding and wage reporting return using magnetic media in accordance with the provisions of paragraph (2) of this subdivision, and any person filing Part A of a quarterly combined withholding and wage reporting return, may, upon adequate advance notice to be provided by the department, be required to file Parts A and B of such return for the applicable calendar quarter using machine-readable paper form in accordance with instructions promulgated by the department.

(4) Waiver. The commissioner may waive the requirements of this subdivision if hardship is shown in an application filed pursuant to this paragraph. A request for waiver shall be in writing and shall be on such form as may be prescribed by the Commissioner for such purpose. For Part B of quarterly combined withholding and wage reporting returns covering calendar quarters beginning after December 31, 1992, such request must be filed no later than 30 days after the start of the of the first calendar quarter for which a waiver is requested. In determining whether hardship has been shown, the principal factor to be taken into account will be the amount, if any, by which the cost of filing Part B of the quarterly combined withholding and wage reporting return in accordance with this subdivision exceeds the cost of filing Part B of such return on other media. If the commissioner grants a waiver, such waiver shall specify the calendar quarter or quarters to which it applies and shall also prescribe the method of reporting to be utilized.

(h) Failure to perform certain acts with respect to the quarterly combined withholding and wage reporting return.

(1) Failure to furnish wage reporting information.

(i) General. Section 685(v)(1) of the Tax Law provides that if an employer required to file the quarterly combined withholding and wage reporting return referred to in this section fails to include on Part B of such return required quarterly wage reporting information relating to individual employees, or to include such quarterly wage reporting information which is true and correct, and fails to correct such required quarterly wage reporting information after notification by the Department of Taxation and Finance by certified mail, return receipt requested, for more than 30 days after the mailing of such notice of failure to comply, such employer shall, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, be liable for a penalty in the following amount for each employee required to be included in such return:

(a) for the first such failure for one reporting period in any eight consecutive reporting periods, up to $1 for each such employee;

(b) for the second such failure for any reporting period in any eight consecutive reporting periods, up to $5 for each such employee; and

(c) for the third such failure for any reporting period in any eight consecutive reporting periods, and for any such failure in any eight consecutive reporting periods which failure is subsequent to the third such failure, up to $25 for each such employee.

(ii) True and correct wage reporting information. For purposes of this paragraph, an inconsequential error or omission is not considered a failure to include true and correct information. An inconsequential error or omission means any failure that does not prevent or hinder the Department of Taxation and Finance from processing the wage reporting information shown on Part B of the quarterly combined withholding and wage reporting return. The following errors and omissions shall never be considered inconsequential:

(a) employer and employee identification numbers,

(b) a surname of an employee; and

(c) any monetary amounts.

(iii) Example. The provisions of this paragraph can be illustrated by the following example (assume in such example no reasonable cause and lack of willful neglect with respect to the specified failure):

Example:

Employer A timely and correctly filed A's wage reporting reports on form WRS-2 during calendar years 1990 and 1991. A timely files A's first quarterly combined withholding and wage reporting return covering the first calendar quarter of 1992 on April 30, 1992. However, on Part B of such return, A fails to include gross wages for wage reporting purposes with respect to 100 of A's employees. A fails to correct such omission within 30 days after being notified thereof by the Department of Taxation and Finance by certified mail, return receipt requested. Based upon the foregoing, A would be liable for a penalty of up to one dollar for each such employee (or up to $100 in the aggregate), and for any other penalty or addition to tax as may be prescribed by law. If A, when timely filing A's quarterly combined withholding and wage reporting return covering the second calendar quarter of 1992, fails to include on Part B of such return gross wages for wage reporting purposes with respect to 50 of A's employees, and A fails to correct such omission within 30 days after being notified thereof by the Department of Taxation and Finance by certified mail, return receipt requested, A would be liable for a penalty of up to five dollars for each such employee (or up to $250 in the aggregate), and for any other penalty or addition to tax as may be prescribed by law. If A, when timely filing A's quarterly combined withholding and wage reporting return covering the third calendar quarter of 1992, fails to include on Part B of such return gross wages for wage reporting purposes with respect to 75 of A's employees, and A fails to correct such omission within 30 days after being notified thereof by the Department of Taxation and Finance by certified mail, return receipt requested, A would be liable for a penalty of up to $25 for each such employee (or up to $1,875 in the aggregate), and for any other penalty or addition to tax as may be prescribed by law.

(2) Failure to file or late filing.

(i) General. Section 685(v)(2) of the Tax Law provides that if an employer required to file the quarterly combined withholding and wage reporting return referred to in this section fails to file either Part A or Part B, or both Parts, of such return, or fails to file such Part or Parts of the return on or before the required due date, such employer shall, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, pay a penalty equal to the greater of $1,000 or the product of $50 multiplied by the number of employees shown on Part B of the most recent quarterly combined withholding and wage reporting return filed by such employer for a prior calendar quarter. If no such return has been filed, the number of employees may be estimated by the Department of Taxation and Finance from any information in its possession. However, if the employer files Parts A, B or both, of such employer's quarterly combined withholding and wage reporting return, as the case may be, within 30 days after notification of such penalty by the Department of Taxation and Finance by certified mail, return receipt requested, then such penalty shall be abated. If the employer files Parts A, B or both, of such return, as the case may be, more than 30 days after such notification, the employer shall instead pay a penalty equal to the product of $50 multiplied by the number of employees actually shown on Part B of such employer's quarterly combined withholding and wage reporting return filed for the calendar quarter in which the failure described in this subparagraph occurred. For purposes of computing the penalty described in this paragraph, the number of employees shown on Part B of the employer's quarterly combined withholding and wage reporting return shall be determined in accordance with the aggregation rules prescribed by subparagraph (g)(2)(ii) of this section. The total amount of the penalty imposed pursuant to section 685(v)(2) of the Tax Law for each such failure in a calendar quarter cannot exceed $10,000.

(ii) Example: The provisions of this paragraph can be illustrated by the following example (assume in such example no reasonable cause and lack of willful neglect with respect to the specified failure):

Example:

Employer C timely files C's quarterly combined withholding and wage reporting return for the first calendar quarter of a calendar year, properly showing thereon information relating to five employees. In the second calendar quarter of such calendar year, C fails to file Part B of C's quarterly combined return. C receives notice of a $1,000 penalty pursuant to Tax Law, section 685(v)(2) from the Department of Taxation and Finance by certified mail, return receipt requested. C files Part B of C's quarterly combined return after 30 days of receiving such notification, properly showing thereon information relating to five employees for such calendar quarter. C is liable for a penalty of $250 pursuant to Tax Law, section 685(v)(2), determined by multiplying $50 by the five employees actually shown on Part B of the late filed quarterly combined return, and for any other penalty or addition to tax as may be prescribed by law (for example, Tax Law, section 685[v] [1]). Note however that if C never files Part B of C's quarterly combined return for such calendar quarter, C would be liable for a penalty of $1,000 pursuant to section 685(v)(2) of the Tax Law and for any other penalty or addition to tax as may be prescribed by law (for example, Tax Law, section 685[v][1]).

(3) Failure to furnish annual employee specific withholding reconciliation information.

(i) General. Section 685(v)(3) of the Tax Law provides that if an employer fails to include all of the annual employee specific withholding reconciliation information required to be shown on Part B of the quarterly combined withholding and wage reporting return covering the last calendar quarter of a calendar year, such employer shall, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, be subject to a penalty equal to $50 multiplied by the number of employees for whom information is inaccurate or incomplete. However, if the number of such employees cannot be determined from the quarterly combined return, the Department of Taxation and Finance may utilize any information in its possession in making such determination. The total amount of the penalty imposed pursuant to section 685(v)(3) of the Tax Law cannot exceed $10,000.

(ii) Inaccurate annual employee specific withholding reconciliation information. For purposes of this paragraph, an inconsequential error or omission is not considered a failure to include accurate information. An inconsequential error or omission means any failure that does not prevent or hinder the Department of Taxation and Finance from processing the annual employee specific withholding reconciliation information shown on Part B of the last quarterly combined withholding and wage reporting return for a calendar year. The following errors and omissions shall never be considered inconsequential:

(a) employer and employee identification numbers;

(b) a surname of an employee; and

(c) any monetary amounts.

(iii) Example: The provisions of this paragraph can be illustrated by the following example (assume in such example no reasonable cause and lack of willful neglect with respect to the specified failures):

Example:

Employer D timely files D's quarterly combined withholding and wage reporting return for the fourth calendar quarter of a calendar year. On Part B of such return, D properly indicates the employer identification and name of each of D's 50 employees. However, D fails to provide information relating to gross wages paid to each of D's employees during such fourth calendar quarter, and also fails to provide annual reconciliation information relating to wages subject to withholding paid to each of D's employees. D is liable for a penalty of $2,500 pursuant to section 685(v)(3) of the Tax Law, and for any other penalty or addition to tax as may be prescribed by law (for example, Tax Law, section 685[v][1]).

(4) Failure to include complete or correct nonemployee specific information.

(i) General. Section 685(v)(4) of the Tax Law provides that if an employer fails to include required quarterly information not relating to individual employees on Part A of the quarterly combined withholding and wage reporting return, or to include such required quarterly information which is true and correct, such employer shall, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, be subject to a penalty equal to five percent of the quarterly withholding tax liability required to be shown by such employer for the quarter covered by such return. If such liability required to be shown by such employer for the quarter cannot be ascertained, the Department of Taxation and Finance may estimate such liability from any information in its possession. However, if the employer corrects such employer's failure within 30 days after a notification has been sent by the department by certified mail, return receipt requested, informing such employer of the penalty, then, such penalty shall be abated. No penalty shall be imposed if the department is able to properly verify and reconcile withholding and wage reporting information using the information furnished by the employer. The total amount of the penalty imposed pursuant to section 685(v)(4) of the Tax Law for each such failure in a calendar quarter cannot exceed $10,000.

(ii) Inaccurate nonemployee specific information. For purposes of this paragraph, an inconsequential error or omission is not considered a failure to include true and correct information. An inconsequential error or omission means any failure that does not prevent or hinder the Department of Taxation and Finance from processing Part A of the quarterly combined withholding and wage reporting return. The following errors and omissions shall never be considered inconsequential:

(a) employer identification number;

(b) failure to properly identify the calendar quarter and year for which Part A of the quarterly combined return is being filed; and

(c) any monetary amounts.

(iii) Proper verification and reconciliation.

(a) Part A filers. Where the Department of Taxation and Finance is able to verify an employer's withholding and wage reporting information using employer's returns of tax withheld (form WT-1) and information on Part A of such employer's quarterly combined return for the same calendar quarter showing the date of each payroll made by such employer after which an employer's return of tax withheld was required to be filed and a remittance of withheld taxes was required to be made, and the total taxes withheld in each payroll period by such employer, then no penalty shall be imposed pursuant to section 685(v)(4) of the Tax Law.

(b) Form WT-4AEZ filers. Where an employer indicates, on such employer's form WT-4AEZ portion of the quarterly combined return, information relating to the total amount of taxes withheld by such employer for the calendar quarter covered by such return, then no penalty shall be imposed pursuant to section 685(v)(4) of the Tax Law.

(iv) Example. The provisions of this paragraph can be illustrated by the following example (assume in such example no reasonable cause and lack of willful neglect with respect to the specified failure):

Example:

Employer E timely files Part B of E's quarterly combined withholding and wage reporting return for the third calendar quarter of a calendar year. However, E fails to file therewith Part A of such quarterly combined return. E fails to file Part A of E's quarterly combined return within 30 days after receiving notification of the penalty prescribed by Tax Law, section 685(v)(4) by certified mail, return receipt requested. The Department of Taxation and Finance is unable to properly verify and reconcile E's withholding and wage reporting information for the calendar quarter. E will be liable for the penalty prescribed by section 685(v)(4) of the Tax Law and for any other penalty or addition to tax as may be prescribed by law (for example, section 685[v][2] of the Tax Law).

(5) Failure to utilize proper format.

(i) General. Section 685 (v) (5) of the Tax Law provides that if an employer who is subject to, or who elects to be subject to, the provisions of section 658(d)(2) of the Tax Law and subdivision (g) of this section fails to file Part B of a quarterly combined withholding and wage reporting return using the format prescribed by the Department of Taxation and Finance pursuant to the authority of such section 658(d)(2) and such subdivision (g), such employer shall, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, be deemed to have failed to file such return and shall be liable for the penalty prescribed by section 685(h)(1) of the Tax Law.

(ii) Examples. The provisions of this paragraph can be illustrated by the following examples (assume no reasonable cause and lack of willful neglect for the specified failures):

Example 1:

Employer F is required to file Part B of F's quarterly combined withholding and wage reporting returns using magnetic media pursuant to section 658(d)(2) of the Tax Law and subdivision (g) of this section. F must include 300 individuals on Part B of F's quarterly combined withholding and wage reporting return covering the first calendar quarter of a calendar year. F, without a waiver, timely files F's Part B on paper rather than utilizing magnetic media. F will be liable for a penalty of $10,000 for such failure.

Example 2:

Assume the same facts as in example 1, except that F timely files Part B of F's quarterly combined withholding and wage reporting return utilizing a magnetic media format which the Department of Taxation and Finance cannot process. F will be liable for a penalty of $10,000 for such failure.

(6)

(i) Comprehensive example. The following example illustrates that all of the provisions of section 685(v) of the Tax Law may apply to the same set of facts (assume in such example no reasonable cause and lack of willful neglect with respect to the specified failures):

Example:

Assume that employer G fails to timely file Parts A and B of G's quarterly combined withholding and wage reporting return for the fourth calendar quarter of a calendar year. Also assume that G is required to submit Part B of such return using the format prescribed by section 658(d)(2) of the Tax Law and subdivision (g) of this section and that this is G's first failure to file Part B using the prescribed format during the calendar year. G will be liable for the penalties prescribed by Tax Law, section 685(v)(3) and (v)(5), and if G fails to correct its errors within the applicable time periods prescribed by Tax Law, section 685(v)(1), (2) and (4), G will also be liable for such penalties and for any other penalties or additions to tax as may be prescribed by law.

(ii) Example illustrating abatement provisions. The following example illustrates application of the abatement provisions of Tax Law, section 685(v)(1), (2) and (4):

Example:

Assume the same facts as in the example in subparagraph (i) of this paragraph, except that G files both Parts A and B of G's quarterly combined withholding and wage reporting return within the applicable time periods prescribed by Tax Law, section 685(v)(1), (2) and (4). Further assume that when filing such Parts A and B, G includes both true and correct wage reporting information and non-employee specific withholding information which allows the Department of Taxation and Finance to properly verify and reconcile G's quarterly withholding information. The penalties prescribed by Tax Law, section 685(v)(1), (2) and (4) will be abated. The penalties prescribed by Tax Law, section 685(v)(3) and (5) will not be abated since the statute does not provide for abatement of such penalties.

(7) Interaction between the penalties in section 685(v) of the Tax Law and other penalties.

(i) General. Except for the penalties prescribed by section 685(h)(1) of the Tax Law (relating to failure to file certain information returns) and section 685(k) of the Tax Law (relating to failure to supply identifying numbers), the penalties prescribed by section 685(v) of the Tax Law shall be in addition to any other penalty or addition to tax provided by law. However, the penalty prescribed by section 685(h)(1) of the Tax Law shall apply as provided in section 685(v)(5) of the Tax Law (see paragraph [5] of this subdivision).

(ii) Examples. The provisions of this paragraph can be illustrated by the following examples (assume no reasonable cause and lack of willful neglect with respect to the specified failures):

Example 1:

Employer H does not exceed the $700 threshold for remittance of withheld taxes at any time during the first calendar quarter of a calendar year (see section 174.1 of this Part). H late files Part A of H's quarterly combined withholding and wage reporting EZ return for such quarter, and also late pays H's withheld taxes. Assume that H does not file Part A of such EZ return within 30 days of receiving notice from the Department of Taxation and Finance of the penalty prescribed by section 685(v)(2) of the Tax Law. H will be liable for the penalties prescribed by section 685(a)(1), (a)(2) and (v)(2) of the Tax Law and for any other penalty or addition to tax prescribed by law (for example section 685[v][4] of the Tax Law), except for the penalties prescribed by section 685(h)(1) and (k) of the Tax Law.

Example 2:

Employer I exceeds the $700 threshold during a calendar quarter for remittance of withheld taxes and fails to file I's employer's return of tax withheld on form WT-1 and fails to pay over I's withheld taxes. In addition, I fails to file Part B of I's quarterly combined withholding and wage reporting return for such calendar quarter on or before the required due date. Assume that I does not file Part B of such quarterly combined return within 30 days of receiving notice from the Department of Taxation and Finance of the penalty prescribed by section 685(v)(2) of the Tax Law. I will be liable for the penalties prescribed by Tax Law, section 685(a)(1), (a)(2), (v)(2) and for any other penalty or addition to tax prescribed by law (for example section 685[v][1] of the Tax Law), except for the penalties prescribed by section 685(h)(1) and (k) of the Tax Law.

(8) Reasonable cause. For provisions relating to reasonable cause, see section 2392.1 of this Title.