What you need to know about Form W-2

What is Form W-2 used for?

Form W-2 is the tax document that reports an employee’s yearly wages and the taxes withheld from their pay.

In short, Form W-2:

• Records wages, tips, and other pay for each employee
• Shows federal, state, Social Security, and Medicare taxes withheld
• Goes to the IRS and to each employee every year

The government requires companies to pay their share of taxes from employee salaries. So when you have many employees and tax fees to track, you need one clear record. That record is Form W-2. Read on to learn its purpose and how to file it the right way.

What is Form W-2?

Form W-2, also called the Wage and Tax Statement, records the pay given to employees and the tax withheld from it. So it serves both employers and employees. Employers must provide it to the IRS each year. In addition, employees use it to track their income tax return.

Besides federal or state taxes, Form W-2 also reports employer fringe benefits, such as medical insurance and dependent care aid. So it gives a full view of pay and benefits. Form W-2 is due on or before January 31 each year. As a result, each employee has enough time to file income taxes for the prior year.

Parts of Form W-2

A W-2 form is the same for every employee. So it is split into federal and state sections, since taxes are filed for both. On the form, you will find the employer’s details, such as the Employer Identification Number and state ID number.

On the employee’s side, you list their total earnings for the year. You also list the taxes withheld from their pay. These amounts are part of your payroll liabilities. The tax withheld is then set against their gross tax obligation. As a result, a refund is issued if too much tax was withheld. In addition, if an employee earns tips, the form shows how much they received that year.

Who needs to file Form W-2?

All employers must file Form W-2. So you file one W-2 for every employee paid a wage, salary, or other compensation. This differs from contractors, so it helps to know the difference between 1099 and W-2 employees. Employees may receive more than one W-2 if:

• They changed jobs within the calendar year
• They work more than one job as an employee
• The company was acquired by another company

Independent contractors are different. So they get a 1099-NEC form instead of a W-2.

Filling out Form W-2

To file Form W-2 correctly, you need to understand its lettered and numbered sections. The lettered boxes (A through F) ask for basic employer and employee details. So this includes the employee’s name, address, ZIP code, and Social Security number. On the employer’s side, it asks for the name, address, ZIP code, Employer Identification Number, and control number.

After the lettered boxes, you move to the numbered boxes. These cover wages and taxes. Much of this reflects taxable income and the taxes tied to it.

• Box 1: Employee’s wages, tips, and bonuses
• Box 2: Federal income tax withheld from the employee’s pay
• Box 3: How much pay in Box 1 is subject to Social Security tax
• Box 4: Amount of Social Security tax withheld
• Box 5: How much pay in Box 1 is subject to Medicare tax
• Box 6: Amount of Medicare tax withheld
• Box 7: How much the employee reported in tips
• Box 8: How much in tips the employer allocated to the employee
• Box 9: Now-defunct tax perk
• Box 10: Amount of dependent care benefits
• Box 11: The amount paid to the employee from the employer’s deferred compensation plan
• Box 12: Lists other types of compensation or income reductions
• Box 13: Three boxes for earnings not subject to federal income tax, such as retirement benefits or sick pay
• Box 14: Any extra information not covered by the other sections
• Boxes 15 to 20: Used to report state and local income tax details, including:
  • How much of the employee’s pay is subject to state income tax
  • How much state income tax is withheld from pay
  • How much is subject to local income tax
  • How much local tax is withheld from pay

How to get Form W-2?

Employees get their Form W-2 by mid-February. So employers mail it to their home addresses. In addition, workers can ask for an online copy from HR or the payroll provider. If they cannot access it online, or it does not arrive in time, they should follow up with HR. Many firms rely on payroll processing services to send these forms on time.

Ensuring tax compliance with Form W-2

Form W-2 is key to staying compliant with federal tax rules. So it keeps your business on the right side of the law.

The form details a person’s earnings, taxes withheld, and other pay information. In addition, businesses must stay updated on tax law changes and deadlines. As a result, you can adjust in time and log tax details fully and accurately. Strong payroll best practices for compliance make this far easier.

Frequently asked questions about Form W-2

What is the difference between a W-2 and a 1099?

A W-2 goes to employees. A 1099 goes to independent contractors. So a W-2 shows withheld taxes, while a 1099 usually does not. As a result, contractors handle their own tax payments.

When is Form W-2 due?

Employers must send Form W-2 by January 31 each year. So employees usually have it by mid-February. As a result, they have time to file income taxes for the prior year.

What should I do if I do not receive my W-2?

First, contact your employer or HR department. Then ask for a mailed or online copy. If it still does not arrive, you can reach out to the IRS for help.

Can an employee get more than one W-2?

Yes. For example, this happens if they changed jobs during the year. It also happens if they hold more than one job. So each employer sends its own W-2.

Who is responsible for filing Form W-2?

The employer files Form W-2 with the IRS. So the employer also gives a copy to each employee. As a result, employees use it to file their own taxes.

Key takeaways

• Form W-2 reports an employee’s yearly wages and the taxes withheld from their pay.
• It covers federal, state, Social Security, and Medicare taxes, plus some benefits.
• Employers must file it with the IRS and give a copy to each employee by January 31.
• Employees can receive more than one W-2 in a single year.
• Accurate W-2 filing keeps your business compliant with federal tax rules.