Form W-2

Updated on January 4, 2024
Article byKosha Mehta
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Form W-2?

Form W-2, more formally known as the “Wage and Tax Statement,” is a tax form employed in the United States to notify remuneration paid to staff and the taxes that were withheld from those wages by the Internal Revenue Service (IRS). When a company pays a staff a remuneration, wage, or another form of compensation in connection with the employment relation, the employer must fill out a W-2 form for that employee.

Form W-2

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Before January 31 at the latest, an employer must send the W-2 form to their employees via mail. Because of this deadline, these taxpayers have approximately two months to prepare their tax returns before the April 15 deadline for filing returns. In addition, the Social Security Administration can also receive information about Federal Insurance Contributions Act (FICA) taxes through this form.

Key Takeaways

  • Employers use W-2 forms to record employees’ FICA taxes. These forms are a tool that the IRS employs to keep tabs on people’s tax responsibilities.
  • Employer will supply staff with vital tax information on Form W-2, including details on wages, tax withholding, and perks, among other things.
  • Each year, by January 31, W-2 forms are mailed to employees, who should utilize them to file their tax returns.
  • W-2 forms are the documents that the IRS uses to keep track of the working income an individual earned in the previous year.

Form W-2 explained

An individual is considered on a W-2 status if their employer withholds taxes from their pay and reports those withholdings to the relevant authorities. For example, during the year, employers must report the taxes owed under the Federal Insurance Contributions Act (FICA) to their staff members using W-2 forms.

In addition, Form W-2 and Form W-3 must be submitted to the Social Security Administration by employers on behalf of their staff members by the end of January. This filing requirement relates to the prior year. The Social Security Administration (SSA) uses the data on these forms to determine the amount of Social Security benefits due to each worker.

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Instructions

No matter the employer, every W-2 will have the same fields. Since employees must file taxes on state and federal levels, W-2 forms are broken up into sections corresponding to each level. Some fields provide information about the employer, such as the federal Employer Identification Number (EIN) of the business as well as the state ID number of the employer. The rest fields are primarily comprised of specifics regarding the employee’s earnings from the year before.

There is a record of the staff’s total earnings from the employer for the year and the sum withheld in taxes from the staff’s salaries. This amount is broken down into the amounts withheld for federal income tax, Social Security tax, and other applicable taxes. In addition, if the worker is also compensated through tips, a field will display the total amount of money the employee received in tips throughout the year.

When the worker submits their tax return, the amount of tax withheld following the W-2 form is subtracted from the total tax the worker is responsible for paying. A tax refund will be issued if more money is withheld for taxes than was owed.

Form W-2 is another tool the IRS uses to keep tabs on an employee’s taxable income and other financial details. The Internal Revenue Service may choose to audit a taxpayer if the income reported on the tax return and the income reported on the W-2 do not coincide. However, taxpayers must disclose any income they receive from salaries, wages, and tips, even if that revenue is not disclosed on a W-2 form.

How To File?

An employee of a firm receives a W-2 for income taxes, and the company will send it to them automatically each year. This is because the W-2 is required by the Internal Revenue Service (IRS). W-2 will be sent to the Internal Revenue Service by the employer.

When an employee is first recruited, they will be asked to submit the details that the employer requires to keep a record of salary, tax withholding, company perks, and pre-tax contributions to items like a 401(k) retirement account on a Form W-4 (or sometimes Form W-9). The W-4 form provides information to the employer regarding the amount of tax that should be withheld from an employee’s paycheck. As another consideration, this information is determined based on the individual’s marital status, the number of allowances, and dependent family members.

While preparing taxes, one must enter the information on W-2 into a Form 1040 individual tax return. This can be done manually or electronically, depending on preference. In many instances, online tax preparation software allows an individual to directly import the information found on W-2 from a payroll provider.

Examples

Let us have a look at the examples to understand the concept better.

Example #1

A UNSCA article advises employees about electronic W-2 forms. Employees are urged to sign up for electronic delivery of their W-2 Wage and Tax Statement forms as soon as possible if they have not already done so. The message adds that they should do so immediately if they have not done so. UNCSA is required by laws issued by the IRS to provide paper W-2 forms to employees. However, if employees approve, they can get their W-2 forms in an electronic version instead.

The only thing that employees need to do to provide their approval is to get their 2022 W-2 forms electronically. The permission document needs to be handed in no later than Friday, January 13, 2023. After providing authorization, employees will also be able to access past years’ W-2 forms.

It educates employees that getting their W-2 in electronic medium is better for the environment and will save them time. Employees who do not provide permission to receive their W-2 forms electronically will have their paper copies mailed on January 31, 2023, at the permanent address we have on file for them.

Example #2

An update on the 2023 Form W-2 is discussed in an article published by Bloomberg Tax. According to what it says, the Internal Revenue Service has distributed a draft of the 2023 Form W-2. By January 31, 2024, form 2023 must have been submitted and distributed to workers.

On September 29, 2022, the Internal Revenue Service (IRS) published a draft of the W-2 form for the year 2023. The draft does not include any significant modifications from the edition of the form used in 2022. In addition, the employee copies and instructions have been condensed so that they may fit on a single page in the draft. However, the employer Copy D has not been included.

In the instructions given to employees, certain dollar values were to surplus Social Security tax withheld and elective deferrals. These money amounts were replaced with placeholders.

Form W-2 vs 1099

  • The purpose of the W-2 and the 1099 forms is to disclose the income obtained from various sources during the tax year. The conditions under which it is received and the amount of taxes deducted from pay set them apart.
  • A person who works for an employer can get a W-2 form from that company. However, if he works for a firm as an independent contractor rather than a W-2, he would most likely receive a Form 1099-NEC from that company.
  • The amount of tax withheld from each paycheck is the primary factor differentiating a W099 from a W-2. This is because employers (W-2) take money out of paycheck regularly and remit it on the employee’s behalf to the relevant tax authorities at various points during the year.

Form W-2 vs Form W-4

  • To begin, the person who fills out each form is different. An employee must submit a W-4 form and hand it to an employer. At the end of each year, the company is responsible for preparing a W-2 form and submitting it to employees, the Internal Revenue Service, and the Social Security Administration.
  • Second, the W-4 form gives the company the details to determine how much tax should be withheld from each paycheck. Finally, the W-2 form details how much money the employee made from the company and the amount of tax that was withheld on the employee’s behalf over the previous fiscal year.
  • When an employee is recruited for the first time or if any changes need to be made to their filing status or withholding, the W-4 form must be filled out. At the end of the tax year, employers are responsible for completing the W-2 form and sending it to their employees to be included in their tax returns.

Frequently Asked Questions (FAQs)

What is form W-2g?

Earnings from gambling, as well as tax withholdings, are reported on Form W-2G. Fill out this form to report any wins from gambling and any income tax that was withheld from those earnings by the federal government.

What is form W-2c?

A W-2C is a document used to adjust pay and tax information previously supplied on W-2 forms, either from the current year or preceding years. It is a multi-use document, similar to Form W-2, that is used to report rectified earnings to the (IRS), (FTB), and (SSA)

What is form w-2 used for?

Essential details on the income received from the employer, the amount of taxes taken from each paycheck, perks offered, and other details for the year are shown on a W-2 tax form. The IRS requires this document. Individuals must fill out this form to file their federal and state taxes.

This has been a guide to what is Form W-2. Here, we explain it with its examples, instructions to file it, and its comparison with Form 1099 and W-4. You can learn more about it from the following articles –

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