What This Letter Means

Letter 98C comes from the IRS's Combined Annual Wage Reporting program. It tells an employer that wages reported on its employment tax returns (Forms 941, 943, 944, or other 94X returns, or Schedule H) don't match the Forms W-2 filed with the Social Security Administration. Usually the employer reported more Social Security wages to the IRS than it reported to SSA on W-2s.

SSA tried twice to resolve the mismatch with you before sending the case to the IRS. If you use an accountant or payroll provider, they may get a copy.

Why It Matters

If the mismatch isn't resolved, the IRS assesses a penalty for intentional disregard of the W-2 filing requirement. That penalty can be 10 percent of the aggregate amount not reported correctly, and it has no maximum. If you send the missing W-2s, a smaller late-filing penalty per W-2 may apply instead. First-time abatement doesn't apply to these penalties. Only reasonable cause does.

What to Do

  • Missing W-2s: attach the W-2s you didn't file behind the letter and response page.
  • Already filed: send proof the W-2s were timely submitted to SSA.
  • Errors on your filings: include Forms W-2c or Form 941-X that fix the difference, and make sure the corrections don't throw your account out of balance.
  • You disagree: send a signed statement explaining why.
  • Asking for penalty relief: explain what kept the W-2s from being filed, from the original due date through today. The IRS knows SSA already contacted you twice.

Mail or fax your response to the address or number on the letter. Keep copies.

Deadlines

The IRS must receive your response within 45 days of the letter date. If it doesn't, the case closes as a no-reply and the penalty is assessed automatically. A CP215 notice then shows the assessment.

If your business received Letter 98C and needs help resolving the W-2 mismatch, call us at (813) 229-7100.