What is Form W-2 - Wage and Tax Statement

IRS form W2, also referred to as the Wage and Tax Statement, is a document that the IRS/SSA requires an employer to send to each individual employee and the IRS at the end of a tax year. The W-2 Form is used to report an employee’s annual wage and the total amount of taxes withheld from their paychecks.

What is the Purpose of the W-2 Form?

The purpose of W-2 is for employers to report an employee’s total gross earnings, social security earnings, Medicare earnings, and both federal and state taxes withheld from the employee.

The importance of W-2 is to provide employees with information on what they should include in their income tax form.

Who Qualifies for a W-2

Any employee whose employer deducts taxes from their paychecks and submits it to the government is qualified to fill a W-2 form. Employers are required by the IRS to send a Form W-2 to their employees in January and a copy to the IRS. For one to qualify for a W-2, they must have been paid at least $600 during the year. If one qualifies for a Form W-2, the employer must provide them with a W-2 and submit a copy to the IRS.

However, it is very important to note that independent contractors and freelancers do not have to file a Form W-2; instead, they are required to get a 1099 (a form used to record income received as an independent contractor/freelancer or from other sources)

Difference between a W-2 and W-4

The main difference between Form W-2 and W-4 is that Form W-2 is simply a report generated by an employer that outlines an employee’s earnings and tax withholdings for a specified tax period, while Form W-4 is a form used to inform the employer of the appropriate tax withholdings amount that they should deduct from their employee’s income.

How do I get my W-2?

There are numerous ways to obtain a copy of an old Form W-2 that one attached to their tax returns. The first way is to request their employer to give them a copy of their W-2, and the second method is to use IRS Form 4506 to request a copy of their tax return or request IRS tax transcript online.

How to file the W-2 Form

A W-2 Form is a multipart form with each part meant for a specific recipient:

· The first copy- Copy A should be submitted to the Social Security Administration

· Copy 1 is meant for the city, state, or the employee’s locality

· Copy B is used for filing with the employee’s federal tax return

· Copy C should be kept by the employee for record purposes

· Copy 2 should also be submitted to the city, state, or locality

· Copy D should be kept by the employer for record purposes

What Information Do I Need to Complete the W-2 Forms?

There are quite a number of things that you will need to complete the W-2 forms, including; information about the employee, your business, employee’s earnings, withholding tax, and benefits.

1. Information about the employees

To complete the W-2 Form for each of your employees, you will need to have their updated personal information, including their:

· Name

· Address

· Tax Identification Number

· Social Security Number

2. Information about your business

When filling in each W-2 Form for your employees, you will have to include information about your business:

· Your business names

· Business Address

· Employer ID Number

· Business’s State Tax ID Number

3. Information about your Employee’s Earnings

This is another crucial part that you will have to complete when filling in the W-2 Form. Information to be included in this section includes:

· Total wages, Tips, and Compensations

· Medicare wages

· Allocated tips

· Social security tips

· Social security wages

What should I do If I Make a Mistake on the W-2 Form?

Before sending out W-2 forms to each of your employees, it is important that you check for errors. If, by any chance, you end up making a mistake on the W-2 Form, you will be able to correct them before giving them the forms. However, if you discover the mistake after submitting the forms to the SSA- Social Security Administration, you will have to submit a W-2c form and a W-3c form.

IRS Penalties for W-2 Errors

The IRS considers several types of mistakes when determining the penalties resulting from errors on W-2 and W-3 Forms. Some of the areas that they usually take keen note of include:

1. Inconsequential Errors: These are errors that will hinder the SSA/IRS from processing the Form

2. Incorrect Information: Failing to provide correct information about an employee, including their Taxpayer ID Number, Surname, and their earnings

3. Errors due to reasonable cause: These are errors resulting from typos and not willful neglect. For instance, when filling in the W-2 Form, something beyond your control may have happened, for example, a power outage or a calculation error. In this case, you must be able to prove to the IRS/SSA that you acted reasonably and took the necessary steps to avoid the errors.

NOTE: It is important to note that intentional disregard of providing the correct information in the W-2 Form has a penalty of $500 per W-2 Form, with no maximum.

Where can I get the W-2 Form?

You can obtain a W-2 form from the official IRS Website. You can also obtain one from any reputable office supply store or website. Another alternative will be to fill one online, which will save you time, money, and the trouble of getting the forms.

Frequently Asked Questions

1. Why is a W-2 needed to file a tax return?

The IRS requires employers to report each employee’s wage and salary information on a W-2 form. The W-2 Form also reports the total amount of federal, state, and other taxes withheld from an employee’s paycheck. The information included on the W-2 Form is important as it helps employees when filing their tax returns.

2. How do I file taxes without a W-2?

If you are unable to obtain a W-2 form or 1099, you can still file your taxes by filling out form 4852 – a substitute for form W-2.

3. What happens if I file my taxes and forget a W-2?

If you happen to file your taxes and forget to mail a copy of the W-2 to the IRS/SSA but accounted for the income when filing your taxes, you will not need to file an amendment, and you will not face any penalty; however, if you forgot to include your income, you can remedy the situation with an amendment return, although you may have to pay a small penalty or interest.