You are the payroll manager for a medium-sized hardware chain. You take a 2-week vacation at end of year in December. Before you leave, you train a trustworthy employee, Jesse, on the payroll system. All the employees have automatic deposit, so it was fairly routine.

You come to work on January 5th and begin processing W-2s due to employees by the January 31 deadline. Around February 15th, Jesse introduces you to a former employee who worked part-time during the Christmas rush. He thanks Jesse for getting his paycheck to him before the holidays. After the employee leaves, Jesse explains that there was a problem with some of the part-time new employees over the Christmas rush. There were 5 part-time employees who did not have valid bank accounts, so the payroll system rejected the automatic deposit. Jesse had Accounts Payable write checks to replace the rejected payroll checks after deducting the appropriate withholdings.

Jesse did not know that the rejected payroll checks invalidated the employee from the payroll system. The replacement checks written from accounts payable did not appear on the payroll checking account; so the payroll system had no record of it. It only affected 5 employees who had 2 weekly paychecks each.

You decide you can

1. Ignore the problem since it was immaterial. Out of 250 employees only 5 would be missing W-2s.
2. Explain to management that Jesse had made an error; and now the company must send out a W-2C (W-2 Corrected) and possibly incur a fine for missing the January 31 deadline. There is a possibility Jesse may be fired.
3. Explain to management that you did not double-check the payroll; and now the company must send out a W-2C (W-2 Corrected) and possibly incur a fine for missing the January 31 deadline. There is a possibility you may be fired.
4. Other please explain your other option

Which option do you chose and what procedures would you implement to correct this for the future?