What is a W-2 Form?
Each year, employers are responsible for furnishing Form W-2 to each of their employees and the Social Security Administration. This form specifies the employee’s annual earnings, taxes paid and other with-holdings. It also lists the employer’s information such as their name, address, and EIN as well as the employee’s information like their name, address, and SSN.
Your Responsibility as an Employer
By January 31st of each year, employers must distribute completed copies of Form W-2 to each employee as well as the Social Security Administration (SSA). Depending on their state, employers may also be required to supply the state with copes of Form W-2.
The SSA strong suggests all employees file W-2 Forms through Business Services Online. A step-by-step list on how to file W-2s along with helpful hints and customer support can be found at this site.
There are penalties for late and unfurnished W-2s. For more information about penalties, refer to the instructions on Form W-2.
To avoid penalties, apply for an extension of filing forms with the SSA by filling out IRS Form 8809. The IRS requires employers to file this form by January 31st. If the due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. There is no automatic extension for filing W-2s, the IRS must approve the request. If approved, there will be one, 30-day filing extension, no further extensions can be granted.
Keep in mind, this extension does not extend the due date for supplying recipients with copies of their W-2’s and/or filing with the state.
Your Responsibility as an Employee
Though employers are requires by law to issue copes of Form W-2 to their employees by January 31st, it’s not always that simple. Sometimes employers forget, especially if they closed their business part way throughout the year. Other times, they may have incorrect information, including an old address, which makes it impossible for the employee to receive a copy. Because this form is necessary to prepare individual income tax returns, the responsibility to receive Form W-2 and verify information is also up to the employees.
Upon receiving the form, it’s important to check that the name, address, Social Security number, income, and with-holdings are all accurate. If for some reason any of the information appears inaccurate, contact your employer immediately. If you do not receive your Form W-2 or if your employer refuses to furnish a copy, contact the IRS at 1-800-829-1040.
More about the Form
Form W-2 has six copies: A, B, C, D, 1, and 2. There are also 26 boxes with information. Though this may seem daunting, it’s actually rather simple to understand with the right help.
What are Each of the Copies For?
Copy A is for employers and should be sent, along with Form W-2, to the SSA office. These forms can be mailed or submitted via the link above.
Copy B (along with copies C and 2) should be sent to the employee. The employee should attach this copy to their federal income tax return.
Copy C (along with copies B and 2) should be sent to the employee. The employee should keep this copy with their tax documents in a safe and secure location.
Copy D is for business records and does not need to be sent anywhere. We recommend businesses keep these records for at least 7 years.
Copy 1 is for employers and should be filed with the state. Most states have the same January 31st deadlines but not all. Confirm with your appropriate state.
Copy 2 (along with copies B and C) should be sent to the employee. The employee should attach this copy to their state income tax return.
What Do Each of The Boxes Mean?
Boxes A-F: These boxes are for informational purposes and include things such as the business name, address, EIN, along with the employee’s name, address, and SSN.
Box 1 reports total taxable income and includes wages/salary, bonuses, tips. It also includes other taxable income such as a certain reimbursements, fringe benefits, and awards. It does not include elective deferrals such as employee contributions to a 4019(k) or 403(b) plan.
Box 2 reports the total federal income tax withheld throughout the year.
Box 3 reports the total amount of wages that are subject to Social Security Tax. For 2018, the maximum amount of wages subject to Social Security Tax is $128,400 meaning the maximum amount of Social Security is $7,960.80 (6.2% of the cap). If a taxpayer held two jobs or an employer over withheld, the taxpayer should first work with their company’s HR department to correct the mistake and second, claim a refundable credit on their tax return.
Box 4 reports the Social Security tax, described above, that was withheld.
Box 5 reports the wages subject to Medicare. These wages are the same wages and tips reported in box 3 except there is no cap. If the earnings in box 3 are less than $128,400, then the amounts in box 3 and box 5 will be the same.
Box 6 reports the Medicare tax withheld on box 5 wages and tips. Since Medicare is a flat rate of 1.45%, this amount should be equal to the amount reported in box 5 multiplied by 1.45%.
Box 7 reports the amount of tip income recorded throughout the year.
Box 8 reports the amount of tips allocated to the employee. This income is not recorded in boxes 1, 3, 5, or 7.
Box 9 reports a verification code fore certain employers. Often it is left empty.
Box 10 reports the Fair Market Values for the amount of dependent care benefits paid or incurred by the employer under a dependent care assistance program.
Box 11 reports any amounts that were distributed to an employee from the employer’s non-qualified deferred compensation plan or non-government Section 457 pension plan. 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. The amount in Box 11 should already be included as taxable wages in Box 1.
Box 12 reports other various compensation and benefits. The benefit type is denoted by the code prior to the amount. Some suggested codes are found in the instruction for Form W-2.
Box 13 reports a checkbox for each situation listed that applies. Meaning, if the employee was a statutory employee, the first box will be checked. If the employee received third-party sick pay under the employer’s third-party insurance policy instead of directly from the employer, the third and final checkbox will be marked.
Box 14 reports any other information an employer should disclose. A few examples of items that may be reported in this box include state disability insurance taxes withheld, union dues, uniform payments, health insurance premiums deducted, nontaxable income, and/or educational assistance payments. Each item listed in this section should include it’s own description as well as the amounts paid.
Box 15 reports the two-letter abbreviation of the employer’s state and state tax ID number. This is sometimes left blank on an employee’s copy but is used by states for easier verification purposes.
Box 16 reports the total state taxable wages received within the year.
Box 17 reports the amount of state income tax withheld from box 16 income.
Box 18 reports the total amount of local, city, or other state taxable wages received within the year. If no other local taxes apply, this box, along with boxes 19-20, are left blank.
Box 19 reports any box 18 with-holdings.
Box 20 reports a brief description of the local, state, or other state income taxes referred to in boxes 18 and 19.
Whether you are an employee, an employer, or both, Private Tax Solutions can help you worry less about the details of Form W-2. We offer accounting, tax preparation, and tax resolutions services nationwide. Don’t hesitate to reach out to us for questions or comments about our services. We’re here to help!