A W-2 Form is the most common IRS tax form for the American public. This W-2 form is primarily critical, showcasing an employee’s total earnings for the previous year and the amount of taxes that are withheld.
Mostly the full-time employees need to receive their W-2 form from their employees before they begin to complete their return, and the companies are required to issue them latest by Jan 31st 2023.
What is a W-2 Form?
Form W-2, also known as a Tax statement, is a document that an employer must send to every employee and the IRS (Internal Revenue Service) at the end of the year. A W-2 report employee is someone whose employer eliminates taxes from their paycheck stubs and submits this information to the government.
A W-2 form may include the following:
- Tips and other forms of allowances
- Contribution made to a retirement plan like 401(k)
- Donations made to a Health or Medicare savings account
- Cost of healthcare benefits
Whether you do the taxes on a piece of paper or your computer, you must use the information from W-2 Form to file your return.
Who files W-2 Forms and Tax Statements?
An employer must legally send a W-2 form to each employee to whom they had paid a salary or another kind of allowance. This does not include self-employed employees who file taxes with different conditions. The employer is to send the a W-2 form to the employees on or before Jan 31st each year so that the employee have enough time to file the income taxes before the deadline, which is April 15th.
The employers must also use the W-2 form to report it to Federal Insurance Contributions Act (FICA) taxes for their employees throughout the year. By the end of January, the employers must file for the preceding year’s W-2 and W-3 Forms for every employee with the Social Security Administration (SSA). The SSA then uses the information on the form to calculate the Social Security Benefits.
When Should I Receive My W-2 Form?
You should receive your W-2 form latest by Jan 31st. That’s when the employer must send W-2s to all the employees and the IRS, as the law states.
While many companies may send a W-2 Form via mail, many make it available online for easy access. Your W-2 form may also come from a third party that handles your company’s payrolls, like Gusto.
How to File a W-2 Form and Tax Statement?
If you’re an employee of a company and receive a W-2 form for your income taxes, it will be sent to you automatically each year by your employer. Your employer will also submit a copy to the IRS.
The standard information provided on a W-4 Form when you’ve recently hired provides the data your company needs to keep track of payroll, tax withholding, employer-provided benefits, and pre-tax contributions like 401(k) retirement plans.
A W-4 form tells the employer the amount of tax to withhold from an employee’s paycheck based upon the employee’s marital status, number of allowances and dependant and several other factors.
When an employee prepares his income tax, he will need to fill in the data found on your W-2 form into a Form 1040 individual tax return; it can be done electronically or by manual process. Online Software that is available online allows you to directly import this information on your W-2 form from your payroll provider.
What Information Does a W-2 Form Include?
Every W-2 Form has the same field, regardless of the employer. Generally, a W-2 form is divided into federal and state sections since the employees must file taxes at both levels.
Some fields may provide the employer’s information, including the company’s identification number (EIN) federal and the employer’s state ID number. The remaining areas are the details of the employee’s income from the previous year.
An employee’s total earnings provided by the employer are noted down along with the amount that is withheld in taxes from the employee’s paycheck, separated into withholding for federal income tax purposes, Social Security Tax and much more. If an employee works for a little extra money, a new field will appear showing how much money is in the tips column the employee has earned in the current year.
If an employee works multiple jobs, the W-2 forms they provide must be filled out separately.
When an employee files taxes, the amount hidden from the W2-form is deducted from their gross income obligations. If more taxes are withheld than they’re owed, then a refund shall be issued.
IRS uses this W-2 form to track an employee’s income and tax liability. The IRS can audit the taxpayer if the income reported on an employee’s tax does not match the income reported on the W-2 form. So, the taxpayer must report all of his salary, wages, and tip income; even if that income is not reported on the W-2 form.
How to Read A W-2 Form?
Now that you know what is a W-2 form, let’s take a look at how you can read a W-2 form which is mentioned below:
Box A To F: Information about you and your employer, including name, address of employer, employer’s EIN and State Id, and Social Security Number.
Box 1: Total amount of income you received through tips or other allowance.
Box 2: How much federal income tax was withheld from your paycheck?
Box 3: How much of your income is subject to Social Security Tax?
Box 4: How much was the Social Security Tax withheld from your paycheck?
Box 5: How much of your income is subject to Medicare taxes?
Box 6: How much of Medicare Taxes was withheld from your paycheck stubs?
Box 7: Any tip income you have reported to your employer is subject to Social Security taxes.
Box 8: Tips income that was allocated to you by your employer.
Box 9: This box should be blank as it deals with no longer use tax perks.
Box 10: How much you have received in dependent care benefits.
Box 11: How much money was distributed to you from your employer’s taxable negotiated allowance plan?
Box 12: Shows assorted forms of income that you will report to the IRS, like a 401(K) contribution.
Box 13: This box notes payments are not subject to withholding for federal income tax.
Box 14: This box is an additional space for more information that may not fit elsewhere in the form.
Box 15 to 20: Shows state tax information, including how much of your payment is subject to state income tax and the total amount that is withheld.
Conclusion:
Form W-2 is an IRS form that employers must send to an employee and to the IRS every year. This form reports an employee’s annual income and the taxes withheld. Employers also use this form to file their taxes every year.
