The W-2 tax form contains important information, such as the earned income from the employer, the tax withheld from the salary, the benefits that a taxpayer is entitled to get, and many others. The IRS or the Internal Revenue Service requires every employer to use this tax form W-2 when they report the wage and other important salary information of their employees.
Besides the withheld taxes from your paycheck, employers will also use the W-2 tax form to report their fringe benefits, such as adoption and dependent care assistance, health insurance, and even their health savings account contribution. So since W-2 is so important to all employees in the country when filing their tax return during the tax season, let us see what is it to claim on this particular tax form and everything else you need to know.
How Many Tax Allowances You Should Claim
When you’re working for a particular company and every time you get paid for your salary, a certain amount will be automatically withdrawn from your paycheck that will be processed as your income tax during the tax season. But the number of allowances you can claim will depend on the tax withholding amount taken from your paycheck.
So when filing your W-4 form, you have to know how many allowances you can claim as you start a new job in a company, or after an important event in yoru life like marriage, child adoption, or childbirth. It’s because knowing the correct number of allowances you can claim based on your situation is crucial when filing your legal taxes in the IRS.
If you’ve claimed too many allowances, you may end up owing some buck to the Internal Service revenue at the end of the tax season. But the chance is high that you get your money back as your tax return when you claim fewer allowances. So the lower the withholding tax amount, the more allowances you can claim. To make sure you do the right thing, you can make use of the Personal Allowances Worksheet that you can find attached to the W-4 tax form if you want to calculate the right number of allowances for you.
Here are some examples. If you’re a single person who has one job and who lives alone, you have to place a 1 in parts A and B on the worksheet. This will give you a total of two allowances. However, if you are married to your spouse but you still don’t have children yet, but both of you have jobs, you and your spouse should claim on allowance each.
Employer-Sponsored Health Coverage Reporting on Form W-2
The Affordable Care Act or ACA requires all employers across the country to report the cost of their employer-sponsored group health plan coverage. It includes tax-exempt organizations, businesses, and even the local, federal, and state entities. But there’s an exception with respect to plans of the health coverage primarily maintained for military members and respective families. Besides that, Indian tribal governments that are federally recognized are not subject to this particular requirement.
So when these employers do the report on Form W-2, it doesn’t mean that the coverage is taxable. The employers’ contribution to the health coverage is still excludable from the income that the employees are getting every month. On top of that, it is not taxable.
Moreover, there is transition relief from the information and details to report the coverage value beginning with the Forms W-2 of 2012 for particular coverage types and employers. The said transition relief was first applied to the W-2 forms in 2013 that were issued to the taxpayers in 2014.
It will continue to be applicable for the 2015 tax year up to this time until there’s new guidance that can affect this requirement from the IRS. But you have to know that any additional guidance from the agency that will expand the reporting requirements will only be applicable to the calendar years for at least six months after the issuance or the new guidance takes effect.
When is the Filing of W-2 Forms Due in 2022?
The IRS mails the W-2 tax forms on the 31st of January, but it doesn’t necessarily mean that the employees have already received them on that particular date. So to make sure that the taxpayers have enough time to process their tax return, the agency will require the employers to send their employees the form no later than on 31st of January.
If you are an employer, by January 31st, you should file these forms with the IRS and the SSA or the Social Security Administration. But if you need more time to do so, you will have an extension of 30 days by submitting Form 8809. This is the form you need for the Application for Extension of Time to File Information Returns.
When you plan to apply for this extension, you should provide your employees with the W-2 copies on the 31st of January unless you also need to apply for an extension to provide your employees with their W-2s after the due date. You have to do this even if you’ve done the request and received the extension with the agency and the SSA.
Also, unless you need an extension of 30 days by faxing a letter to the Internal Revenue Service, you can request a 15-day extension to provide your employer with their W-2 tax forms.
Important Things to Keep in Mind with W-2 Forms
However, in any case, if employees haven’t received their W-2 forms, they have to get in touch with their employers so that they can be provided with an electronic version of the form that they can use until they received the hard copy of it in the mail. Besides that, if the taxpayer couldn’t get a copy of the form from the employer, they can also call the IRS hotline for a substitute W-2 form. After that, the agency will contact the employer by sending a letter on the employee’s behalf.
So if this happens to you, you have to the agency and provide the following details below:
- Your address, name, SSN, and phone number.
- Employer’s name, address, and phone number
- Dates of your employment
- Your estimated wage and withheld federal income tax
But if you notice some errors on your W-2 tax form when you received it, you can also let your employers know about it and ask them to send you the corrected form. These errors may include misspelled names, the incorrect amount of the tax, the wrong SSS or Social Security Number, and other important issues with your information.
Moreover, there are taxpayers who may also receive more than one W-2 tax form if:
- They work multiple jobs as an employee
- They have multiple jobs within the same calendar year
- The company they work for has been acquired by another company
In addition, there are other requirements you have to keep in mind when you need to file the tax form W-2. You will receive this form if your annual income is at least $600 in a given tax year. If you also have an employer who withholds taxes from your paycheck, you will also receive this tax form. But you will likely file Form 1099 instead of the W-2 tax form if you are not an employee or you only work as a contracted individual.
General Instructions When Filing Form W-2
If you’re an employer, you should file Form W-2 if you’re making payments, including noncash payments, for the services of your employees rendered in your company or business. You have to complete filling out this tax form for each of your employees with the following requirements below.
- You withheld any Medicare tax, social security, or income from the salary of your employees
- If your employees claim no more than one withholding allowance or they hadn’t claimed an exemption from withholding on the said form, you would withhold their income taxes.
- You, as an employer, processed the payment of $600 or more than that as wages of your employees even though you did not withhold any of their social security, medicare tax, or income tax.
Reading Form W-2
Boxes A-F
These boxes contain all the important information about you and your employer. It includes your SSN, name, and address. You can also there your employer’s EIN or employee Ideinficationb Number, address, name, and even the control if there’s any.
Boxes 1-2
You will find in these boxes the total taxable income that your employer paid for your salary, bonus, tips, and other taxable compensation for your services.
Boxes 3 and 5
In these boxes, you will see your earning amount subject to Medicare taxes and Social security. In boxes 4 and 6, you can also find there the amount of taxes withheld for your Medicare taxes and Social Security. But the amount you will find in boxes 3 and 5 may be different from what you can see inside box 1.
Boxes 7-8
If you’re getting tips as you work for an employer, you will see the money you’ve earned through tips in these boxes.
Box 9
When this box becomes grayed out, it means that the reported employer benefit doesn’t exist anymore.
Box 10
If you have dependent/s and your employer is paying for these care benefits, you will see the amount paid in this box on the form.
Box 11
This box shows the information about the employer’s particular deferred compensation you received from a non-qualified plan.
Box 12
This box 12 shows your other reductions or compensations for your taxable income.
Box 13
This box on your W-2 form shows information about whether you worked for an employer as a statutory employee who is not subject to federal income tax withholding. It also shows details if you received sick pay from a particular third-party source. If you also participated in a retirement plan sponsored by your employer like 403(b) or 401(k), you will find the details inside this box.
Box 14
Your employer may use this box 14 to report other information about your taxes that doesn’t fit in any boxes provided on your W-2 form.
Boxes 15-20
These boxes that your employers use to report local and state income tax information with your employer’s state ID number and the 2-letter abbreviation for the name of the state you’re living in.
The Form W-2 is also known as the Wage and Tax Statement. This is the document that employers need to send to each of their employees working for them and the IRS at the end of the tax year. This particular tax form contains the annual salary of the employees as well as the tax withheld from their paychecks. It means that the W-2 employee is a legal taxpayer in the country whose employers take taxes from their salary, withhold taxes, and submit all of this information during filing the tax return to the US government. So if you need assistance when filing your tax returns, you can always seek help from a tax professional.
