W-2 Form Explained
Table of Contents
Key Takeaways:
- Employers must fill out a copy of the IRS W-2 Form, Wage and Tax Statement, for every employee of their business who earned more than $600 during the tax year.
- There are several copies of the W-2 tax form: copies A, D, and 1 are for the employer to report and store a copy of employee earnings, and copies B, C, and 2 are for the employee to file their income taxes and store a copy for their tax records.
- Employers must send the W-2 forms and file them with the Social Security Agency (SSA) by January 31, and employers must use the information reported on W-2 forms to file their income tax returns by the Tax Day deadline of April 15.
What Are W-2 Forms?
IRS Form W-2, Wage and Tax Statement, is a tax form filled out by employers regarding every employee of their business to report their annual wages and the amount of taxes withheld from their paychecks.
Using the information reported in W-2 forms, the IRS can track individual taxpayers’ tax obligations as they can compare the information reported by the employer and the employee to ensure this information matches.
Who Must Fill Out W-2 Forms
Employers are responsible for filling out W-2 forms for each of their wage-earning or salaried employees who have earned more than $600 during the tax year. Any self-employed workers, freelancers, or independent contractors are not included in the workers who will need a W-2 form to file their taxes.
The employer may have to fill out W-2 forms for employees who earned less than $600 in the situation where there were taxes withheld from an employee’s earnings, including Social Security and Medicare taxes, or if they would have been subject to tax withholding in the case that no more than one withholding allowance or zero exemptions were claimed using Form W-4.
Who Files W-2 Forms?
Both employees and employers must use the W-2 Form to report taxes to the IRS for the previous tax year.
Employers
After the employer has sent out all of the required W-2 forms to their employees, they must use their copy of the form when preparing their taxes to report the information to the appropriate locations.
Employers must file W-2 forms with the Social Security Administration (SSA) and the IRS by January 31st to report FICA taxes.
Employees
Employees must use the information reported on their W-2 form to fill out their IRS Form 1040, Individual Tax Return. While the W-2 form does not directly need to be filed by the employee, the employee does need to use the information to file their tax return by the Tax Day deadline of April 15.
IRS W-2 Form Copies
The employer of a company in charge of payroll responsibilities will be required to prepare multiple copies of the W-2 tax forms.
Employer Copies
Copy A
Copy A of IRS W-2 forms is used by the employer to report their employee’s tax obligations to the Social Security Administration.
Copy D
Copy D of the W-2 tax form is the employer copy to keep in their financial records for at least 4 years.
Copy 1
Copy 1 of the W-2 tax form is used to report earnings to the state, city, or local tax department.
Employee Copies
Copy B
Copy B of IRS W-2 forms is used by the employee to report their federal income tax. While this copy of the tax form is not directly sent to the IRS, the information on Copy B, and all other copies, of the W-2 form is where the employee can access the information necessary to fill out their income tax return.
Copy C
Copy C of the IRS W-2 form is for the employee to keep a copy in their tax records.
Copy 2
Copy 2 of the W-2 tax form is used to report state, city, or local income taxes.
Who Will Receive A W-2 Form?
Every taxpayer who is an employee at a company and had earned at least $600 during the tax year will receive a W-2 Form explaining their income near the beginning of the year. The number of hours of work and pay rate does not factor into this $600 earning total. An employee is a worker who is paid a salary, wage, or another form of compensation that excludes freelancers, self-employed individuals, or independent contractors, as these workers use different tax forms to report their non-employee income.
Who Receives Multiple W-2 Forms?
Some circumstances warrant taxpayers being sent multiple W-2 Forms for their income tax return filings. These situations include:
- Changing jobs during the tax year
- Working as an employee at more than one business
- Working as an employee at a company that was acquired by another company.
When Are W2 Forms Due?
The due dates for W-2 forms to be sent out by an employer and filed by the employee are two separate deadlines.
Employers are required to send W-2 forms to their employees by January 31 of the following tax year. Employees can expect to receive their W-2s within the first few weeks of February.
Once the W-2 forms have been received, taxpayers must file the form with the IRS by the Tax Day deadline, which usually falls on April 15th.
What To Do If You Didn't Receive A W-2
Employers are responsible for sending out W-2 forms to all of their employees, so if you have not received your W-2 form by early-to-mid February, you can contact your employer directly to ask for a copy. In this instance, they may issue a digital or electronic copy of the W-2 form for the employee’s records while they wait for the physical copy to arrive in the mail.
What To Do If You Lose Your W-2
If you lose your W-2 form before you have a chance to file your federal income tax return, you can either access the digital copy of your W-2 form online or contact your employer or payroll supervisor to request a new paper copy of the form.
Information Included In W-2 Forms
Employer Information
The information about the employer recorded in the W-2 forms includes:
- The company’s name
- The federal and state Employer Identification Number (EIN)
- The employer’s name
- The company address and ZIP code
Employee Information
The information about the employee recorded in the W-2 forms includes:
- The employee’s name
- The employee’s Social Security number
- The employee’s address and ZIP code
It is beneficial to note that the employer may use the employee’s gender or legal name as reported on their government-issued ID. Additionally, the employee’s date of birth should not be needed.
Income Information
The information related to the employee’s income recorded in the W-2 forms includes:
Box 1: Wages, tips, and other compensation
This box details how much the employee earned in wages, tips, and other compensation throughout the tax year.
Box 2: Federal income tax withheld
This box details how much federal income tax was withheld from their total pay.
Box 3: Social Security wages
This box details how much of the employee’s total pay as listed in box 1 was subject to Social Security tax.
Box 4: Social Security tax withheld
This box details how much Social Security tax was withheld from their total income.
Box 5: Medicare wages and tips
This box details how much of the employee’s total pay as listed in box 1 was subject to Medicare tax.
Box 6: Medicare tax withheld
This box details how much Medicare tax was withheld from their total income.
Box 7: Social Security tips
This box details how much of the tip income that was reported and included in box 1 was subject to Social Security tax.
Box 8: Allocated tips
This box details the amount of other tips that they were paid by their employer that were not already included in the income reported in box 1.
Box 10: Dependent care benefits
This box details the amount of dependent care benefit that the employee was paid or that the employer incurred on behalf of the employee.
Box 11: Nonqualified plans
This box details how much money the employer distributed to the employee from their deferred compensation plan throughout the tax year.
Box 12
Boxes 12a-12d offer the employer space to provide more details about the total employee pay that was reported in box 1.
Box 13
Box 13 is the section where the employer indicates which taxes the earnings are subject to, including whether the earnings are subject to FICA taxes but not federal income tax withholding, whether the employee was issued sick pay, and whether the employee participated in a retirement plan.
Box 15: State
This box is where the employer indicates the two-letter abbreviation of the state the earnings were recorded in.
Box 16: State wages, tips, etc.
This box details the total amount the employee was paid in taxable wages and tips during the tax year.
Box 17: State income tax
This box details the total amount of state income taxes that were withheld from their total taxable wage amount as listed in box 16.
Box 18: Local wages, tips, etc.
This box details the total amount of an employee’s yearly earnings, including wages and tips, that were subject to local income taxes.
Box 19: Local income tax
This box details the total amount of local income taxes that were withheld from an employee’s paychecks.
Box 20: Locality name
This box allows the employer a place to input a brief description of the local tax being paid.
Frequently Asked Questions About W-2 Forms
W-2 Form Vs. W-4 Form
While the W-2 forms and W-4 forms are both related to income taxes, there are several differences between the two, such as who prepares the form, if it needs to be filed with the IRS, and the purpose of the form.
W-4 forms are prepared by the employee and submitted to their employer to tell the employer how much tax to withhold from their paychecks.
W-2 forms are prepared by the employer and sent to the employee so both the employer and employee can use the form to report the employee’s earnings and tax withholdings throughout the tax year to the IRS.
W-2 Form Vs. 1099 Form
W-2 and 1099 tax forms are both used to report taxable income to the IRS, but there are differences in the types of workers who use these forms and the related income tax withholdings.
Workers who are employees of a company will receive a W-2 form from their employers informing them of how much they earned throughout the year and how much tax was withheld.
Independent contractors, freelancers, and other self-employed individuals will receive 1099 forms from companies they worked at to report how much income they earned. 1099 workers, however, are usually solely responsible for making tax payments, as the business paying them will not withhold taxes on their behalf.
Correcting Errors On A W-2 Form
If there are any mistakes at all on the W-2 form you received from your employer, this error must be corrected. These mistakes could include a misspelled name, an incorrect earnings amount, a lost decimal point, or an erroneously checked box.
When facing this situation, it is important that taxpayers reach out to their employers to point out the mistake so that it can be fixed. While it will take time for a new W-2 to be generated and sent in the mail, if it was the employer’s error, the employee will have nothing to worry about in terms of fines and penalties. However, the employer who made a mistake and did not get this error corrected by the employer filing deadline of January 31st may be subjected to an IRS fine.
W-2 tax forms play a large role in tax preparation for all employees and employers, so it is essential that these taxpayers understand the requirements when filing their income tax returns. If you need help with any aspect of the tax filing process, the tax professionals at Ideal Tax are here to help. Set up a free consultation today to learn how we can help you save money on taxes this tax season by claiming tax credits and deductions.
Luis serves as the Director of Operations for Ideal Tax, overseeing a multifaceted team including case management, tax professionals, document specialists, customer support, training, and development.
