With tax season in full swing, you’ve most likely received or will receive a number of tax forms. As such, the form W-2 or also known as the Wage and Tax Statement is one of those forms if you’re an employee. You should have a basic comprehension of what the form says and how it affects your bottom line whether you prepare your tax return yourself or get the help of a professional.
An employer issues a form W-2 (blank form downloaded as a pdf) to an employee. Employees are subject to reporting, withholding, and insurance obligations that are distinct from those owed to independent contractors. The amount of money required to issue a W-2 depends on the threshold; not on the time spent working or the position held. It is based only on the dollars earned. $600 is the magic number.
A Form W-2 must be issued by any company that pays an employee at least $600 in cash or cash equivalent, including taxable benefits. Regardless of how much was paid out to an employee, if any taxes were withheld, including those for Social Security or Medicare tax rate, a Form W-2 must be given. If you were paid less than $600 but still received a W-2, don’t be alarmed: an employer may give a W-2 to all employees because it is more convenient for them.
Understanding the W2 Form
Each employee’s W-2 form is duplicated six times by the employer. Yes, you have read it right and that is absolutely a substantial amount of documentation. If you don’t want to get paper copies of this tax form and your company has a system in place, you can choose to receive them electronically. You must expressly consent to this; your company may not transmit an electronic form W-2 to any employee who does not consent or who has revoked consent.
- Copy A.. This copy stands out from the other W-2 forms because it is printed in red, whilst the others are printed in black. Copy A, along with a Form W-3, is sent to the Social Security Administration (SSA) (the form W-3 reports the total of all forms W-2 for the employer). The Protecting Americans from Tax Hikes (PATH) Act has changed the deadline for businesses to submit that information to the Social Security Administration (SSA) for 2018.
- Copy 1. It is sent to the appropriate state, city, or local tax authority.
- Copy D. It is kept by the employer.
For the employees, they can get three copies:
- Copy B is filed with your federal income tax returns to record your federal taxes (Unless you’re filing electronically, in which case you must give it to the preparer, but it’s not usually forwarded to the IRS.).
- Copy 2 is filed with the appropriate taxing authorities to report your state income tax, municipal income tax, or local income tax.
- Copy C will be kept for your records (Keep this copy for at least three years after you file, or until the return is due, whichever comes first.).
Furthermore, to properly fill out your W2 form, you must know its parts and essential blanks to fill in. The left side of the W2 form is for reporting the taxpayer’s details. Here, you will see the following boxes:
Your Social Security Number (SSN) is indicated in this box. Box (a) should always be double-checked to ensure accuracy. Otherwise, you must seek a new Form W-2 from your employer if it is incorrect. An error could cause your return to be delayed. Keep in mind that while truncation of numbers is permitted on some forms, it is not permitted on your W-2.
The EIN of your employer is reported in this box. An EIN is the employer’s version of your Social Security number.
In this box, you’ll find your employer’s address. This is your employer’s legal residence, which may or may not correspond to the location where you work.
Your employer or the payroll department of your employer uses a control number. If your company doesn’t use control numbers, it will not be a major concern, you can simply leave Box d blank.
Box e and f
These appear as one large block on your W-2 form. In this box, your entire name is reported. It’s intended to represent the name on your Social Security card. If your name differs from what appears on your Social Security card, you may need a new form W-2; if you’re not sure, ask your employer. Your mailing address, which could be a post office box, is reported in the box (f) and is likely without punctuation. Notify your employer if your address on the Form W-2 is incorrect: You won’t need a new form W-2, but your employer’s records will need to be updated.
On the other hand, the right side of the W2 form is used to report dollars and codes. You will need to fill out the following boxes:
This box indicates all taxable income, tip income, prizes, and other compensation, as well as any taxable fringe benefits. It excludes pretax benefits, payroll deductions, and elective deferrals to retirement programs.
The entire amount of federal income tax withheld from your pay over the course of the year is reported in box 2. This amount is determined by the exemptions and additional withholding elections on your W-4 form.
This box indicates the total wages that are subject to Social Security tax. This figure is computed before any payroll deductions, so it’s possible that the value in box 3 is higher than the one in box 1.
This space indicates the entire amount of Social Security tax withheld throughout the course of the year. In contrast to federal income taxes, Social Security taxes are determined at a flat rate.
Box 5 shows wages subject to Medicare taxes. Generally, Medicare wages exclude any pre-tax deductions and will include most taxable benefits.
This box indicates the amount of Medicare tax withheld for the entire year. Medicare taxes are like Social Security taxes, they are calculated based on a flat rate.
Box 7 and 8
If you receive tips as part of your compensation, these boxes show how much you reported in tips (Box 7) and how much your company reported in tips it paid to you (Box 8).
A 16-digit verification code may be seen here. It’s part of a larger security strategy to help the IRS verify the form’s authenticity.
This box shows the amount of dependent care assistance program you received from your employer (if applicable).
This space is used to record amounts received from your employer’s nonqualified deferred compensation plan.
Other types of compensation or deductions from taxable income are listed in Box 12 along with a single or double letter code that corresponds to each. Contributions to a 401(k) plan, for example, may be included. The IRS’ W-2 guidelines include a list of codes.
This box contains three sub boxes for reporting pay that is not subject to federal income tax withholding, if you participated in an employer-sponsored retirement plan, and if you received sick pay from a third-party, such as an insurance policy.
Box 14 on a W-2 form permits an employer to report any additional tax information that does not fit into the other sections. State disability insurance taxes deducted and union dues are two examples.
The W-2’s remaining six sections all deal with local taxes and state income taxes withheld, including how much of your payment is due to these taxes.