What Is W-2: Wage and Tax Statement?

Triston Martin

Feb 04, 2022

An employer must send a form known as a "Wage and Tax Statement" to each employee and the Internal Revenue Service (IRS) at the end of each year. A W-2 is a tax form that shows a worker's yearly earnings and the amount of taxes deducted from those earnings during that year. It is the responsibility of the employer to withhold and remit taxes on behalf of W-2 employees.

Form W-2's Anatomy

When it comes time to submit your Form 1040 income tax return, having a copy of your Form W-2 will come in handy. Box 1 contains your yearly gross pay, including bonuses, commissions, and any other kind of remuneration. For the year, you may find out the amount of federal and state income taxes deducted from your paycheck in boxes 2 and 17. Line 7 of your Form 1040 contains the amount from box 1, your taxable income. Taxes withheld by the federal government inbox two are shown on line 62 of your 1040.

Filling out the W-2 Tax Return

Official copies of W-2 forms should be used to print the W-2 formitself. IRS or a local office supply store is two places to get records. State W-2 examples can be seen online but not printed from the IRS website. If you utilize payroll software, ask about electronic W-2 forms for your employees from your payroll supplier. Ensure that each employee's name, address, and Social Security number are correct while filling out Form W-2. Verify the accuracy of your company's name, address, and tax identification number (EIN).

You'll want to be sure that the monetary values on Form W-2 are accurate. The dollar sign symbol should not be used in boxes that report money. Divide the cash by cents using a decimal point (e.g., 1000.00). Ensure you thoroughly check each W-2 form before submitting it to the Social Security Administration and your employees. Form W-2 may be filled out more quickly if you use online payroll software.

Form W-2: Wages and Taxes Statement

If you work for a firm and are owed a W-2, your employer will automatically send it to you each year. The IRS will also get a copy of your W-2 from your employer. Taxes withheld, employee perks and pre-tax contributions to retirement plans like a 401(k). Your employer relies on the information you offer on Form W-4 (or occasionally Form W-9) when recruited. An employee's marital status, number of allowances and dependents, and other considerations are considered when the employer fills out the W-4 form.

Your W-2 data must be entered into a Form 1040 individual tax return, either manually or electronically, when you file your income taxes. You may input your W-2 data straight from your payroll source using online tax preparation software in many circumstances.

What Is On The W-2 Wage and Tax Statement?

Whatever the employer, all W-2 forms have the same information set on them. Since employees must submit taxes at both the state and federal levels, W-2 papers are divided into parts for each of these levels. Employer identification numbers (EINs) (national) and state identification numbers (SIDs) are two examples of employer-provided data. Details of the employee's income from the previous year fill out the remaining sections.

Total earnings from the employer for the year and the amount withheld in taxes from the employee's paycheck are recorded and split into federal income tax, Social Security tax, and other withholdings. An additional field displays how much the employee received in tips for the year if they work for recommendations as well.

If you have many W-2s from other employment, you must enter each one separately. The tax withheld from the W-2 form is subtracted from the employee's gross tax liability when they submit their taxes. A refund will be granted if the employer withheld more tax than the employee owed.

Form W-2 is also used by the Internal Revenue Service(IRS) to keep track of an employee's income and tax obligations. The IRS may audit a taxpayer if the income reported on an employee's tax return does not match the payment shown on Form W-2. Regardless of whether it appears on a W-2, all income must be reported by taxpayers.

Where Do I Find W-2 Information?

Using your payroll register, you can see how much each person has earned and how much they have paid in taxes, as well as how much they have contributed to medical plans and health savings accounts.

For federal income tax and FICA tax (Social Security/Medicare tax) withholding, you'll need a recent W-4 form for each employee. The employee fills out the W-4 form to provide you with their taxpayer ID number (often known as their Social Security number) and the amount of taxes they owe. 9

A W-2 Form Error: What Happens Next?

Check for problems in the forms before distributing them to staff. The condition may be amended if an error is made and returned to the employee. Correcting a state that has been filed to Social Security after a mistake has been detected is as simple as following these steps. The W-2c and W-3c forms must be submitted if the error is discovered after the original documents have been filed. W-2 conditions may be challenging to fill out, and raising the wrong information might result in hefty penalties. Before attempting to fill out W-2 forms on your own, seek advice from a payroll specialist or your tax professional.

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