Little Bits of Income Still Count

It’s easy to overlook smaller amounts of income when it’s time to prepare your tax return. Taxpayers must generally include all income, not just the amount they find on an employer-generated W-2 form. For example, did you make goods and sell them on an online marketplace or at a crafts fair? Did you provide and charge for services via mobile apps? Do you have any seasonal work income? What about savings account interest, dividends and investment gains? Gambling winnings are also taxable. And, of course, self-employment income is too. Make sure you provide records to your tax preparer even for seemingly insignificant amounts.

Can You Split the Mortgage Interest Deduction?

Are you buying a home with someone you aren’t married to? If so, the IRS says that you may each be entitled to deduct half of the cost of the mortgage interest and real property tax you paid. This is true even if only one of you receives a Form 1098, Mortgage Interest Statement, from the lender and/or a property tax statement from the local taxing authority.

However, certain conditions must be met. For example, the house must be the principal residence for both of you. You also must both be legally obligated to pay the expenses and you must have paid them during the year.

Health Insurance Premium Tax Credits

Just in time for tax filing season, the IRS has made several updates to (and added several new) FAQs related to the health insurance premium tax credit. This refundable credit is designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace. The size of the premium tax credit is based on a sliding scale. Indeed, those who have a lower income may receive a larger credit to help cover the cost of their insurance.

Don’t Miss Your Refund Due to an Address Change!

Did your address change since you filed your 2023 tax return? If so, it’s important to notify the IRS of your correct address for your home or business. You can easily inform the IRS of changes to your home address by filing Form 8822. For your business address, use Form 8822-B.

You can also make the change by calling the IRS, or by sending a written, detailed statement with your tax return. Just be aware that it can take weeks for the IRS to process a change. If you are expecting a refund, it may be delayed if you haven’t officially changed your address. Time-sensitive notices from the IRS may also be delayed, causing you to miss a required action. To bypass these problems, you may want to take care of this important task before we prepare your tax return. Or we’ll file the forms for you during your tax appointment.

Bunching Your Medical Expenses for a Higher Deduction

As you file your 2023 tax return, start thinking about how you can boost itemized deductions for 2024. You may be able to “bunch” medical expenses so you exceed the 7.5% of adjusted gross income necessary to deduct some costs. Say, for example, you’ve already scheduled surgery that will involve out-of-pocket expenses but still fall short of the deductible threshold. Think about scheduling elective procedures, such as dental work or Lasik surgery, and making qualified purchases that will push you over the threshold. Note that only the expenses over that amount and that aren’t covered by insurance or paid through a tax-advantaged account will be deductible.

Do you work from home all or part of the time? If you’re self-employed and meet certain requirements, you can write off a portion of your home office expenses, even if you perform work at other locations. The deduction may be based on the actual expenses you’re able to substantiate — or it may be computed using a simplified method approved by the IRS. 

The Basics

Generally speaking, self-employed individuals are eligible for home office deductions if part of their homes are used “regularly and exclusively” as their principal place of business or a place to meet or deal with customers, clients or patients in the normal course of business. In addition, they may be entitled to take deductions for an area used to store products or tools for a business. They also may be able to deduct the costs associated with a separate structure—such as a detached garage or shed — that’s used strictly for storage or other business purposes.

Important: Under current law, employees currently can’t deduct unreimbursed business expenses, including home office expenses. (See “Will Opportunity Knock Again?” at right.)

To qualify for the deduction, you must meet the following two tests:

1. Regular use test. You must use a specific area of your home for business on a regular basis. Incidental or occasional business use isn’t regular use.

2. Exclusive use test. You must use a specific area of your home exclusively for business. This area can be either a room or other separately identifiable space. It’s not necessary for the space to be physically partitioned off from the rest of the room. However, you don’t meet the requirements for the exclusive use test if you use the area both personally and for business.

Another potential obstacle is that the home office must be your “principal place of business.” The IRS may challenge home office deductions if you work at multiple locations, for instance, at your customers’ homes or offices.

Nevertheless, your home office qualifies as your principal place of business if it’s used regularly and exclusively for administrative activities, such as invoicing and managing accounts, and you don’t have any other fixed location for conducting these activities. This often provides an opportunity for taxpayers in a wide range of industries, including physicians, plumbers, freelance writers and landscapers.

Which Door to Go Through?

To claim home office deductions on your 2023 return, you can choose either of the following methods:

Actual expense method. Under this method, you write off the full amount of your direct expenses and a proportionate amount of your indirect expenses based on the percentage of business use of the home. 

For example, Marta used a room comprising 10% of her 3,000-square-foot home as an office for her interior design business in 2023. She spent $5,000 to have the home office painted and carpeted. She also incurred another $10,000 in indirect expenses for the entire home. She meets the requirements for a deductible home office. Under the actual expense method, Marta can deduct $6,000 ($5,000 plus 10% of $10,000) of home office expenses on her 2023 federal income tax return. 

Examples of indirect expenses include:

• Mortgage interest,
• Property taxes,
• Gas, electric, water and other utilities,
• Insurance,
• Home security system costs, and
• Depreciation or rent under IRS tables.

Mortgage interest and property taxes might already be deductible if you itemize deductions on your personal return. If an itemizer claims a portion of these expenses as indirect home office expenses, the remainder is deductible, but you can’t deduct the same expenses twice.

Typically, the percentage of business use is determined by the square footage of your home office. For instance, if you have a 3,000-square-foot home and use a room with 300 square feet as your home office, the applicable percentage is 10%. Alternatively, you may use any other reasonable method for determining this percentage. For instance, you might use a percentage based on the number of rooms of comparable size in the home.

Simplified method. Instead of tracking all your actual expenses, this method allows you to claim a deduction equal to $5 per square foot for the area used as a home office, up to a maximum of $1,500 for the year. This is much easier than gathering all the records required for deducting actual expenses.

Clearly, the simplified method is more convenient to use. But the actual expense method generally produces a bigger overall deduction.

For example, in the hypothetical scenario above, Marta could claim a home office deduction of only $1,500 for 2023 using the simplified method (the lesser of $1,500 or $5 times 300 square feet). That’s $4,500 less than under the actual expense method.

Important: Once you select a method, you’re not locked into using it for all tax years. For instance, you might choose the actual expense method for 2023, then switch to the simplified method for 2024.

Beware of a Potential Tax Trap

There’s one additional tax wrinkle to consider if you claim home office deductions. If you eventually sell your principal residence, you may qualify for a tax exclusion of up to $250,000 of gain for single filers ($500,000 for married couples who file jointly). However, if you use the actual expense method, you’re required to “recapture” the depreciation attributable to a home office for the period beginning after May 6, 1997. To compound the problem, the recaptured amount is taxable at a 25% rate. That’s higher than the maximum long-term capital gains tax rate of 20%.

To make matters worse, the recapture provision technically applies to “allowed” or “allowable” depreciation. That means it’s imposed on a home sale even if you don’t claim depreciation on your return. If you claim home office deductions over several years, the tax liability can quickly add up. Conversely, if you haven’t previously deducted home office expenses and plan to claim the deduction going forward, you might forgo a deduction based on actual expenses.

Important: The recapture rule doesn’t apply if you use the simplified method for deducting home office expenses. This may be another good reason to stick with the simplified method when claiming a home office deduction.

Unlock Your Deduction

The home office deduction can be a valuable tax-saving opportunity for many self-employed taxpayers. Just keep in mind that when you sell your house, there may be tax implications if you have claimed a home office. Consult with your tax advisor to determine what’s right for your situation.

Internal fraud is difficult to detect, which is understandable given the wide variety of techniques that range from stealing cash and supplies, to falsifying expense reports and benefit claims, embezzling funds, and accepting kickbacks from vendors, contractors, and suppliers. But catching dishonest employees isn’t impossible if you focus on the task, take a strong stand against fraud and shake things up a bit.

Here are three relatively straightforward methods that can help your company detect internal fraud:

1. Scrutinize Expenses. When employees feel that expense claims aren’t stringently reviewed, they may pad their reports with inflated or nonexistent expenses. Depending on the employee’s rank, these padded expenses can mount up quickly.

Case in Point: The COO of a paper company routinely submitted monthly expense claims of more than $10,000. On the face of it, the charges all seemed legitimate.

But in reality the executive was claiming full-fare airline tickets to destinations unrelated to the company’s business. He would then refund the tickets to his credit card without reimbursing the company. In addition, he was claiming $3,000 a month in non-existent lodging and car-rental costs, and then using the money to build and maintain his wine collection. The deceptions weren’t discovered until a routine audit, which found that those responsible for overseeing expense accounts were careless.

Expense account fraud represents a greater threat because employees become comfortable with it and move on to submitting claims for even higher expenses or switching to more complex and damaging fraud schemes. Be certain that those who check expense reports are rigorous in their reviews and that everyone from the top down at your business knows that expense claims will be scrutinized.

2. Shake Up Routines. Fraudsters tend to develop habits based on a company’s regular schedules. For example, they know when monthly audits are due and take steps to suspend the fraud and hide evidence until the audits are complete.

Case in Point: A company’s warehouse manager was taking kickbacks from vendors in return for preferential treatment during contract bids. One day, the auditors turned up for an unannounced inventory count. When they arrived, the manager was sharing a bottle of scotch with one of the vendors and the kickback payment was in plain view on his desk.

If an out-of-sequence audit uncovers fraud at your company, be sure to publicize it. And be certain that everyone in the organization knows that unexpected reviews should regularly be expected.

3. Periodically Review Controls. Even if audits are conducted on a routine basis, you should still occasionally review the mechanisms aimed at deterring fraud. Criminally inclined employees spend time and effort learning how to circumvent controls. When they are successful, the company managers may think the controls are doing their job when, in fact, the business may be losing thousands of dollars.

Case in Point: A senior bank teller and her manager regularly stole large sums from the vault of a small community bank branch where they worked. Each month, just before the scheduled branch audit, the teller would replace the missing cash with bundles of blank paper. Her manager would “count” the cash and certify that the amount was correct.

After some cuts in the audit department, the bank trimmed the number of audits and required the auditor to make the actual count. But to save time and meet audit quotas, the auditor would count the stacks rather than the individual notes. The fraud remained undetected and wasn’t discovered until the manager was fired. Had the auditing process been reviewed, the company would likely have noticed the flaws in the controls and discovered the fraud much sooner.

The “perception of detection” is a crucial element in fighting fraud. You can help deter fraud with methods that heighten employees’ concerns about being caught. Consult a professional for advice about systems and controls that will work effectively at your organization, and consider setting up an anonymous hotline for reporting suspected fraud.

Employees, self-employed individuals and employers all pay the Social Security tax, and the bite the Social Security tax takes gets bigger every year. Here’s what you should know — and why you should be concerned.

Social Security Tax on Employee Wages

As an employee, your wages are hit with the 12.4% Social Security tax up to the annual wage ceiling. Half the Social Security tax bill (6.2%) is withheld from your paychecks. The other half (6.2%) is paid by your employer, so you never actually see the second half. Unless you understand how the Social Security tax works and closely examine your pay statements, you may be unaware of how much the tax costs.

For 2024, the Social Security tax wage ceiling is $168,600 (up from $160,200 for 2023, an increase of 5.2%). If your wages meet or exceed the 2024 ceiling, the Social Security tax hit for this year will be $20,906 (12.4% times $168,600), half of which comes out of your paychecks. Your employer pays the other half.

The wage ceiling is projected to rise to $174,900 next year. (See “Projected Security Tax Ceilings,” at right.)

Social Security Tax on Self-Employment Income

Self-employed people, including sole proprietors, partners and limited liability company members, are well aware of the full magnitude of the Social Security tax. That’s because they must pay the entire 12.4% Social Security tax hit out of their own pockets, based on their net self-employment income. The fact that companies don’t owe any Social Security tax on amounts paid to independent contractors is a big reason why they often prefer to engage independent contractors instead of hiring employees.

For 2024, the Social Security tax self-employment income ceiling is $168,600 (the same as the wage ceiling for employees). So, if your 2024 net self-employment income is $168,600 or more, your income will incur the maximum $20,906 Social Security tax hit (12.4% times $168,600).

Social Security Tax Ceiling Increases vs. Social Security Benefit Increases

Most people don’t realize that there’s a disconnect between annual increases in the Social Security tax ceiling and annual increases in Social Security benefits. Common sense dictates that they should be linked, but they aren’t.

For example, the 2024 Social Security tax ceiling is 5.2% higher than the 2023 ceiling, as noted earlier. But Social Security benefits went up by only 3.2% in 2024 compared to 2023. The reason for the discrepancy is that different inflation measures are used for the two calculations. The annual increase in the Social Security tax ceiling is supposedly based on the increase in average wages while the annual increase in benefits is based on a measure of general inflation.  

Is There a Social Security Benefit Account with Your Name on It?

Some people mistakenly believe that the government has an account with their name on it to hold the money to pay for their future Social Security benefits. After all, that must be where all those Social Security taxes on wages and self-employment income go, right? Unfortunately, there are no individual accounts. All you have is an unsecured promise from the government.

In addition, the Social Security system is currently on shaky financial ground. Politicians have known this fact for years, and efforts to address the issue have gone nowhere. The Social Security Administration now projects that the Social Security trust fund will become insolvent in 2034. Previously this projected insolvency date was 2035, so it’s creeping closer. So, additional Social Security tax hikes in the form of higher rates or some tax-law reconfiguration that effectively implements higher ceilings (or both) are probable.

Some politicians have floated a tax-law change that would restart the 12.4% Social Security tax on wages and net self-employment income above $400,000. This is the so-called “donut hole” approach to increasing the Social Security tax. Over the years, the donut hole would gradually close as the lower edge of the hole is adjusted upward for inflation while the $400,000 upper edge of the hole remains fixed.

Don’t Bank on Social Security Benefits Alone

The Social Security tax hits on many individuals will continue to increase under current law. And when it’s time for you to retire, there’s no guarantee that you’ll receive the benefits you’ve been promised. So it’s important to save your own nest egg to supplement the Social Security benefits you’ll receive. Contact your financial advisor to develop a retirement savings strategy that’s right for your situation.

Many business owners fail to follow the strict tax rules for substantiating vehicle expenses. But if your business is audited, the IRS will most likely ask for mileage logs if you deducted vehicle expenses — and it tends to be especially critical of the amount deducted if you’re self-employed or you employ relatives. While the basics seem simple, there are numerous exceptions.

Mileage Logs

Taxpayers can deduct actual vehicle expenses, including depreciation, gas, maintenance, insurance and other vehicle operating costs. Or they can use the standard mileage method, which allows a deduction based on the standard rate for each mile the vehicle is driven for business purposes. For example, the standard mileage rate is 65.5 cents a mile for 2024 (up from 65.5 cents per mile in 2023). If you drive 1,000 miles for business purposes in 2024, you could deduct $670.00 under the standard mileage method.

Regardless of the method used, the recordkeeping requirements for mileage are the same. They’re also the same whether you’re the only employee who uses a vehicle, you employ others who use company vehicles, or an employee uses his or her own vehicle and is reimbursed by the company.

Vehicle logs must provide the following information for each business trip:

• Date,
• Destination,
• Business purpose,
• Start odometer reading,
• Stop odometer reading, and
• Mileage.

Employees who use their own vehicles must provide these details to their employer. If an employer reimburses an employee without the required documentation, the reimbursement is taxable income. If an employee uses a company vehicle, the IRS considers any usage that’s unaccounted for as personal use and the value of unaccounted usage should be included in the employee’s income for the employer to secure a deduction.

The IRS requires “contemporaneous” recordkeeping for mileage. That means a recording at or near the time of the trip. You can record the mileage at the time of the trip and enter the business purpose at the end of the week. But waiting much longer could raise suspicion about the validity of the vehicle log and potentially jeopardize your entire vehicle deduction.

The tax agency requires varying levels of detail, depending on the circumstances. For example, you might be able to list only the customer’s name if you visit someone regularly to demonstrate new products, provide service and take orders. But cold calls to prospective customers may require a more detailed write-up in your vehicle log. A single entry may be enough for visits to several customers in the same day, but you may need to log any detours taken for personal reasons, such as personal errands or lunch with your spouse.

In some cases you may be able to avoid recordkeeping if your company maintains a formal policy forbidding employees from using company vehicles for personal reasons. However, the exception has numerous rules and restrictions. For instance, the policy must be written and meet six conditions, and the exception applies to only employees who aren’t “control” employees, such as:

• Employees who are appointed by the board or shareholders or an elected officer whose pay is $100,000 or more,
• Directors,
• Employees who earn at least $205,000 annually, and
• Employees who own a 1% or more share of equity, capital or profits in the business.

Exceptions to the Rules

We’ve used the term “vehicle,” because the recordkeeping rules apply to more than just cars. Technically, every vehicle is subject to the rules. But the IRS permits specific exceptions for the following vehicles that are unlikely to have more than a minimum amount of personal use:

• Delivery trucks with seating only for the driver or only for the driver plus a folding jump seat,
• Buses with a 20-person minimum seating capacity,
• Special-purpose farm vehicles, and
• Any vehicle designed to carry cargo with a loaded gross vehicle weight of over 14,000 pounds.

Not listed above are more obvious exceptions, such as cement mixers, combines and bucket trucks. In addition, the IRS permits exceptions for trucks or vans that have been specially modified so that they aren’t likely to be used more than a de minimis amount for personal purposes. An example is a van that has only a front bench for seating, has permanent shelving that fills most of the cargo area, constantly carries equipment and has been custom painted with the company’s name and logo.

Simplified Recordkeeping

Complying with the IRS mileage recordkeeping rules can be tedious, especially for workers who drive significant distances for business purposes. Here are some ways you can simplify the process:

Use technology. Mileage logs don’t have to be kept in a written diary or day planner — you can download an app to your tablet or cell phone to track mileage. These apps typically allow you to take a picture of the odometer for the beginning and ending mileage. If you allow this method, require workers to back up their electronic mileage logs regularly to prevent loss of mileage records. Alternatively, you might use GPS tracking of company vehicles to help document mileage.

Apply sampling methods. The IRS allows taxpayers to use the mileage for regular routes — for example, if you visit the same customers on a fixed weekly schedule — and extrapolate the sample mileage over the entire tax year. This can save time, but you’ll have to show that the sample is valid. And if the route changes midyear, you’ll have to show how you updated the sample.

The easiest way to simplify recordkeeping for vehicle expenses is to use the standard mileage rate, rather than tracking actual expenses. Doing so eliminates the need to save gas receipts and maintenance records. But the downside is that this method tends to understate expenses, particularly if you drive an expensive gas guzzler or pay above-average insurance premiums. If a vehicle’s business use is high but its total use is low, actual fixed costs — such as insurance and depreciation — are likely to be higher on a per-mile basis than with the standard mileage rate.

Ongoing Attention

Vehicle expenses can quickly add up for businesses — as well as for individuals who are tracking mileage for itemized medical or charitable deductions, or supplemental business activities such as managing investments in local businesses or rental properties. But as easily as they add up, so too can vehicle deductions vanish in an IRS inquiry.

The key to preserving your deductions is maintaining up-to-date mileage records. Too often, taxpayers assume they can put together a mileage log the night before the IRS visits. That rarely works. For example, the IRS questioned a situation in which the taxpayer used the same pen over a two-year period. In another case, the IRS noticed that the taxpayer claimed to be at the post office and an hour later was at a client 110 miles away. In cases where there are more than a few discrepancies, the IRS often denies all vehicle expense deductions, claiming the mileage log wasn’t credible. On top of losing your deduction, you also might face penalties and interest for underpaying your tax liability.

When it comes to the recordkeeping requirements for vehicles, the IRS rarely allows exceptions for its strict rules. Don’t assume you qualify for an exception, check with your tax advisor first. He or she can help you navigate complicated vehicle recordkeeping rules with confidence.

Did you buy an electric vehicle (EV) in 2023? Under the Inflation Reduction Act (IRA), passed late in 2022, you may be eligible for a new-and-improved tax credit, beginning on your 2023 federal income tax return. But the new law also bars certain high-income taxpayers from claiming the credit.

What’s more, if you’re looking to buy an EV in 2024, you don’t have to wait until you file your 2025 tax return to reap the tax benefit. You may be able to obtain a tax discount at the time of purchase. Here are the details.

Before the IRA Changes Took Effect

Prior to January 1, 2023, you could claim a tax credit for EVs and hybrid plug-ins, up to a maximum of $7,500, if you bought a vehicle meeting certain energy consumption standards. Also, the vehicle had to have a gross vehicle weight rating (GVWR) of less than 14,000 pounds.

Under the old rules, the price of the vehicle didn’t matter. For example, you were able to claim the same $7,500 credit for a Nissan Leaf as a higher-priced Porsche Taycan. The credit was available only to original purchasers of a new vehicle. In other words, no credit was allowed if you acquired a used vehicle from a dealer or through a private resale. Similarly, you weren’t eligible for a credit if you leased an EV from a dealership.

Notably, the credit was subject to a special phaseout rule, based on the manufacturer. The phaseout occurred when a manufacturer sold at least 200,000 qualifying vehicles for domestic use. Back in 2018, Tesla became the first manufacturer to cross this threshold. GM followed soon afterward. This became a critical issue involving some of the most popular EV models.

The credit was claimed in the year you purchased the vehicle. So, if a deal didn’t go through until January, you couldn’t realize any tax benefit until you filed your return the following year. Finally, the credit was nonrefundable. Therefore, if you owed tax of $2,500 and you acquired an EV qualifying for a $7,500 credit, the credit was limited to $2,500 on your return. The $5,000 excess couldn’t be carried forward to subsequent years.

Lane Changes for 2023

The IRA revamps the tax rules for claiming the so-called “clean vehicle credit” on 2023 returns for new EVs and plug-in hybrids purchased in 2023 for domestic use (and not acquired for resale). Generally, the maximum nonrefundable credit remains at $7,500, but other new rules and dollar caps apply through 2032:

• The credit is only available to single filers with a modified adjusted gross income (MAGI) of $150,000 or less ($300,000 or less for married couples who file jointly). If you exceed either threshold, you can’t claim any credit.
• The credit isn’t available for passenger vehicles costing more than $55,000 ($80,000 for vans, sport utility vehicles and pickup trucks, based on the manufacturer’s suggested retail price). For these purposes, the manufacturer’s suggested retail price doesn’t include any taxes or other fees imposed by the dealer.
• The vehicle must be powered by batteries with materials that are sourced from the United States or one of its free trade partners. This restriction applies to vehicles delivered on or after April 18, 2023. Partial credits may be claimed for EVs that meet only one of these requirements.
• The vehicle must be assembled in North America. This can be a difficult hurdle to overcome because many EVs are assembled overseas.
• The 200,000-vehicle threshold for manufacturers has been eliminated.

Visit the U.S. Department of Energy website to determine if a particular vehicle will qualify for the clean vehicle credit. You can search the website database for the make and model, year and date of delivery. This site also provides updated credit amounts (full or partial) for EVs in 2023 and 2024. 

Credit for Used Vehicles

The IRA also opens up the clean vehicle credit to buyers of used vehicles — not just new ones. However, the credit for used EVs is subject to a separate set of rules. Besides requiring specific energy consumption standards and a GVWR of less than 14,000 pounds, the following restrictions apply:

• Only one vehicle transfer qualifies for the credit,
• The purchase price can’t exceed $25,000,
• The car model must be at least two years old, and
• The credit can only be claimed once every three years.

If you qualify, you can claim a credit of up to $4,000 for the EV, limited to 30% of the cost. The credit for used vehicles is only available to single filers with MAGI of $75,000 or less ($150,000 or less for married couples who file jointly). If you exceed either threshold, you can’t claim any credit. (Note that these income limits are half the size of those for the new clean vehicle credit.)

Accelerating the Credit in 2024

A special tax break kicked in on January 1, 2024: The IRS now gives you the option of transferring the credit to the dealership at the point of sale. In essence, the auto dealer can reduce the purchase price by the amount of the credit, or it may provide you with a cash payment on the spot.

To take advantage of this opportunity, dealerships must participate in the IRS-approved online program. Nevertheless, the buyer is ultimately responsible for ensuring that he or she falls below the MAGI limits for eligibility. If you take a rebate and ultimately exceed the limits, you’ll have to pay the IRS back on your 2024 tax return.

Warning: The list of eligible EVs and plug-ins has decreased significantly from 43 models in 2023 to just 13 in 2024. This reduction is attributable to the stricter battery sourcing and assembly requirements under the IRA.

Proceed with Caution

The new rules for EV credits are complex and dotted with potholes. In addition, be aware that several states offer tax breaks for EVs on the state income tax level. Seek assistance from your tax professional for maximizing the tax benefits on 2023 returns and navigating the rules if you’re planning to pocket a clean vehicle credit for an EV purchase in 2024.

Starting for tax year 2023, if you have 10 or more information returns, they must be filed electronically.  This also includes Forms W-2, e-filed with the Social Security Administration. Final e-file regulation details are linked here: https://www.irs.gov/filing/e-file-information-returns