I saw a posting (from about a year ago) that said, “The IRS and SSA say you can abbreviate first and middle names but the entire last name must be printed on the W-2. You can do a web search for "last name too long for W-2" to read up on it”.  

Any chance you could maybe use part of the First Name field?  Otherwise it would seem that you could use a UDF or some other unused field, but I think it might get messy re: tax forms.  Maybe worth a call to Aatrix?  Or I suppose you could just do the applicable W-2’s manually/separately outside of Sage 100.

Thanks Brett! As a f/up do you know if we upgrade to version 2014 does the field length increase. Also, who is Aatrix and how can they help?

No, the field is the same length (15) in v2014.  Aatrix (eFiling and Reporting) is the functionality you need to use now for W-2's, 1099's, etc. since Sage is no longer providing year-end IRD's for the standard 1099, W-2, etc. printing that most of us have been using to-date.