It is that time of the year again when all employees in the U.S. will be expected to fill out their income tax returns. As a worker, you will need a copy of the W-2 tax form issued by your employer. These forms are essential for employees because they determine their tax liability and eligibility for certain tax credits and benefits.
As an employer, you can find the filing process overwhelming. It can also be redundant to fill out the W-2 form for every employee manually, especially if your company is large. Even when you have a finance team onboard, it is not practical to utilize your team’s time and energy on such manual tasks. You can easily create w2 and print W-2 forms more quickly and ensure their accuracy. In this article, we’ll take you through the nuances of W-2 tax forms to help you understand them properly and file them accurately.
The Basics of W-2 Forms
W-2 forms report an employee’s wages and taxes withheld from those wages to the Internal Revenue Service (IRS) and the Social Security Administration (SSA). Employers issue them to their employees at the end of each calendar year, and employees use the information on the form to file their income tax returns. Each W-2 form includes an employee’s biodata, the Employer Identification Number, information on wages and salaries, and the taxes withheld from those wages, such as federal income tax, Social Security tax, and Medicare tax.
Filing the W-2 Form
Employers are responsible for completing and filing the W-2 form by January 31st of each year and sending a copy of each form to the IRS and the SSA. Failure to meet this deadline or filing incorrectly results in a penalty, generally ranging from $60 to $260 per form that is not filed on time and $30 per form that is filed incorrectly. Repeated offenders may face higher penalties.
Eligibility
Any employed person who receives a salary or wages and earns at least $600 in a given year is eligible to receive a W-2 form. This includes full-time, part-time, and temporary employees. It is also important to note that Independent contractors and self-employed individuals are not eligible for a W-2 form, as they are responsible for reporting their income and taxes on a 1099 form.
Sections of the W-2 Tax Form
As with all official documents, W-2 forms can confuse individuals attempting to fill them out for the first time. It is helpful to know about the different sections and partitions of the form to fill in the required fields with the appropriate information. The W-2 form contains boxes labeled using alphabets and numbers. Here are the details of the alphabetical sections.
| Section Name | Details |
| Box A | Box A contains the employee’s Social Security number. |
| Box B | This is the tax identification number assigned to the employer. |
| Box C | This box contains the employer’s name, address, city, state, and zip code. |
| Box D | Box D asks for the control number – a unique identifier assigned by the employer to a specific W-2 form. This is typically a combination of letters and numbers to track and identify the form. |
| Box E | Contains the employee’s full name. |
| Box F | This is the employee’s address, city, state, and zip code. |
Apart from the alphabetical sections, there are 20 more numbered boxes on a W-22 form that you should know about.
| Box Number | Details |
| Box 1 | This asks for the overall total wages earned during the year, including tips and other forms of compensation. |
| Box 2 | This box asks for the federal income tax withheld from the employee’s paychecks. |
| Box 3 | Also termed as the Social Security wages of the employee, this box asks for the total amount of wages subject to Social Security tax. |
| Box 4 | This is the Social Security tax withheld from the employee’s paychecks.
Unlike the third box, this is the actual amount withheld from the wages as Social Security Tax. |
| Box 5 | Also known as the employee’s Medicare Wages, this box should mention the total wages subject to Medicare tax.
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| Box 6 | This is the amount of Medicare tax withheld from the employee’s paychecks. |
| Box 7 | It is the number of tips reported to the employer by the employee (The Social Security Tips of the Employee) |
| Box 8 | This is the number of tips allocated to the employee by the employer (Allocated Tips) |
| Box 9 | This box indicates the amount of earned income credit the employee received in advance. |
| Box 10 | This refers to the number of dependent care benefits provided to the employee by the employer. (Written as Dependent Care Benefits on the form) |
| Box 11 | All applicable information must be mentioned under “Non-Qualified Plans” in the form.
This box contains the number of distributions from nonqualified deferred compensation plans (employer-sponsored retirement plans). The purpose of box 11 is for the SSA to determine if any part of the amount reported in box 1 or boxes 3 and/or 5 was earned in a prior year. |
| Box 12 | This Box on a W-2 form reports various types of compensation and taxes that do not fit into the other boxes. Each type of compensation or tax is identified by a code letter or number. |
| Box 13 | This box indicates whether the employee is a statutory employee, participates in a retirement plan, or receives third-party sick pay. (Marked Under Statuary Employee Retirement Plan and Third-Party Sick pay) |
| Box 14 | It is used to report any additional tax information not reported in the other boxes. |
| Box 15 | Your employer’s state and state tax identification numbers (employer’s State ID number) are listed in Box 15. |
| Box 16 | This box indicates the total amount of wages subject to state income tax. |
| Box 17 | This box indicates the amount withheld from the employee’s paychecks under state income tax. |
| Box 18 | This asks for the total amount of employee wages subject to local income tax. |
| Box 19 | It is the total amount of local income tax withheld from the employee’s paychecks. |
| Box 20 | This asks for brief information on the local, city, or other state tax provided in Box 15-19. (since boxes 15-19 are related to the local and state taxes withheld from the employee wages.) |
Endnote
Apart from individual contractors and self-employed personnel, every person considered an employee by federal tax law requires a W-2 form to file their income tax returns. By the end of each calendar year, all employers are required to fill out a W-2 tax form for their employees. An employer can be fined if they fail to fill out the forms in time or in case any information they provide is incorrect. To avoid this situation, it is essential to thoroughly understand the different numbered and alphabetical sections in the W-2 form.
Remember that you can automate the process of generating and filing the W-2 forms for your employees with the help of software. Before opting for a website or software, make sure you consult an accountant or check with the software provider to ensure that they are authentic and compliant with state and federal regulations.
