W2
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W2 is the common abbreviation for the IRS Form W-2, which is officially titled “Wage and Tax Statement.” It is an annual tax form that employers are legally required to issue to each employee to report wages paid and taxes withheld over the course of the year. The W2 is a critical document for both federal income tax filing and Social Security records.
Employers must file Form W-2 with the Social Security Administration (SSA) and also provide a copy to the employee. The information reported on the W2 is used by the IRS to verify the employee’s income and determine whether the correct amount of federal income tax has been paid.
W2 forms must be distributed to employees and filed with the SSA no later than January 31st of the year following the tax year.
W2 Form
The W2 form is divided into multiple informational boxes that provide detailed breakdowns of an employee’s taxable income, benefits, and tax withholdings. The form includes the following key components:
Key Boxes on Form W-2:
- Box 1 – Wages, tips, other compensation: Total taxable wages earned by the employee.
- Box 2 – Federal income tax withheld: Total amount of federal tax withheld from wages.
- Box 3 – Social Security wages: Wages subject to Social Security tax (may differ from Box 1 due to pre-tax deductions).
- Box 4 – Social Security tax withheld: Amount withheld for Social Security tax.
- Box 5 – Medicare wages and tips: Wages are subject to Medicare tax.
- Box 6 – Medicare tax withheld: Medicare tax withheld during the year.
- Box 12 and 14 – Additional codes: Include items like 401(k) contributions, health insurance, employer-provided benefits, or educational assistance.
- Boxes C and E: Include employer name and EIN, and employee name, address, and SSN.
Who Receives a W2 Form
Employees (not independent contractors) who receive $600 or more in wages from an employer during a calendar year must receive a W2. This includes:
- Full-time employees
- Part-time employees
- Temporary workers (if classified as employees)
Workers classified as independent contractors do not receive a W2; instead, they typically receive Form 1099-NEC.
Employer Requirements
Employers must:
- Prepare a W2 form for each employee who was paid during the year.
- Provide Copies B, C, and 2 to the employee by January 31.
- Submit Copy A to the SSA, either electronically or by paper.
- File Form W-3 (Transmittal of Wage and Tax Statements) when submitting W2s by paper.
Failure to file on time or submitting incorrect information can result in penalties from the IRS and SSA.
Employee Use of W2 Form
Employees use the information on their W2 form to complete their individual federal and state income tax returns. The form is especially important when reporting:
- Total earnings from employment
- Withholdings that may result in tax refunds
- Eligibility for certain tax credits (e.g., Earned Income Tax Credit)
Employees should verify all information on the W2, such as Social Security number and wage totals, before filing a tax return.
Correcting a W2 Form
If an error is discovered on a previously issued W2 form, the employer must issue a Form W-2c (Corrected Wage and Tax Statement). The corrected form must also be filed with the SSA and sent to the employee.
W2 vs 1099
Feature | W2 Form | 1099 Form (e.g., 1099-NEC) |
---|---|---|
Worker classification | Employee | Independent contractor |
Taxes withheld | Yes (federal, Social Security, Medicare) | No (worker is responsible for own taxes) |
Filed by | Employer | Payer (business or client) |
Year-end reporting | Yes (mandatory if $600+ paid) | Yes (if $600+ paid to contractor) |
Record Retention
Both employers and employees are advised to retain W2 forms for at least three to seven years, depending on tax filing history and audit risks. W2s may be needed for loan applications, income verification, or IRS audits.
W2 Submission Methods
Employers can file W2 forms with the SSA using two methods:
- Electronic Filing via SSA’s Business Services Online (BSO): Required if filing 250 or more W2s (as of 2024)
- Paper Filing: Permitted for fewer than 250 forms, though electronic is recommended
Final Note
The W2 form plays a central role in the federal income tax system by linking employer-reported earnings with employee tax filings. Accurate and timely submission of the W2 ensures proper tax withholding, supports Social Security and Medicare programs, and maintains federal compliance for both employers and employees.