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Introduction To What Is W-2 Form
At the end of every year, the documents which an employer is supposed to send the W-2 Form to each employee and the Internal Revenue Service (IRS), this W2 form is also recognized as the Wage and Tax Statement.
Reports about employees’ annual wages and the amount of taxes withheld from their paychecks are shown in the W-2 form.
When an employer deducts taxes from an employee’s paycheck and submits this information to the government then that person is known as a W-2 employee.
Who Needs To File A W-2 Form / Wage And Tax Statement?
Legally an employer is supposed to send out a W-2 form to all the employees to whom they paid a wage, salary, or another form of compensation.
Only contracted or self-employed workers, who file taxes with different forms, are not included in it.
This W-2 form must be sent to the employee by the employer on or before Jan. 31 every year, so that the employee has enough time to file income taxes before April 15 which is the deadline.
W-2 forms must be used by employers to report Federal Insurance Contributions Act (FICA) taxes for their employees throughout the year.
Employers must file Form W-2, along with Form W-3 for the previous year, for each employee with the Social Security Administration (SSA) by the end of January.
The information on these forms is used by the SSA to calculate the Social Security benefits to which each worker is entitled.
As the tax documents are filed for the previous year, so the W-2 form received by an employee in January 2021 will show the income earned in 2020.
The Filing Of W-2 Form - Wage And Tax Statement
Every employee of an organization will obtain a W-2 form for their income taxes, this will be given to them automatically every year by their employer. The employer will also submit a copy of their W-2 with the IRS.
When an employee gets hired the information provided on Form W-4 or on Form W-9 will give all the details required by the company and keep a check on payroll, tax withholding, benefits provided by the employer, and pre-tax contributions like a 401(k) retirement plan.
The W-4 form provides information to the employer on the amount of tax to withhold from an employee’s paycheck based on the individual’s marital status, the number of allowances and dependents, and other factors.
While preparing their income taxes the employee will need to add the data found on their W-2 into a Form 1040 individual tax return, either by hand or electronically.
In many cases with the help of online tax preparation software now people can directly import the information on their W-2 from their payroll provider.
What Is The Information Included In Form W-2: Wage And Tax Statement?
No matter who the employer is, every W-2 has the same fields. The W-2 forms get divided into state and federal sections because the employees have to file taxes at both levels.
Most of the fields are details of the employee’s income from the previous year but some fields provide the employer’s information, like the company’s Employer Identification Number (EIN) (federal) and the employer’s state ID number.
The total earnings by the employee received from the employer for the whole year are recorded, along with the amount withheld in taxes from their paychecks, the withholding for federal income tax, Social Security tax, and more is separated.
If the employee also gets tips, they need to mention the tips earned for the year in the field.
If an employee works multiple jobs that provide W-2s, they would need to input each separately.
While filing tax, the amount of tax withheld as per the W-2 form gets deducted from the employee’s gross tax obligation.
A refund will be issued if more tax was withheld than what the employee owes.
Form W-2 is also used to track an employee’s income and tax liability by the IRS. The IRS may audit the taxpayer if the income reported on an employee’s taxes doesn’t match the income reported on Form W-2.
The taxpayers are supposed to report all wages, salary, and tip earnings even if that income is not reported on a W-2.
How To Read W-2 Form Or The Wage And Tax Statement?
An employer must fill out the W-2 forms, which include both numbered and lettered boxes that and reflect how much has the employee earned and how much taxes has been withheld.
Conclusion
A Form W-2 consists of the employee’s income earned and taxes withheld from the previous year that need to be reported on their income tax returns.
To report FICA taxes for employees the employers use W-2 forms.
The W-2 forms are also used by the IRS to track the individuals’ tax obligations.
