Line-by-Line Guide to Form W-2

What Is Kind W-2: Wage and Tax Assertion?

Kind W-2, also called the Wage and Tax Assertion, is the doc an employer is required to ship to every worker and the Inner Income Service (IRS) on the finish of the yr. A W-2 studies staff’ annual wages and the quantity of taxes withheld from their paychecks. A W-2 worker is somebody whose employer deducts taxes from their paychecks and submits this info to the federal government.

Who Information Kind W-2: Wage and Tax Assertion?

An employer is legally required to ship out a W-2 kind to each worker to whom they paid a wage, wage, or one other type of compensation. This doesn’t embody contracted or self-employed employees, who file taxes with totally different types. The employer should ship the worker the W-2 kind on or earlier than Jan. 31 every year, in order that the worker has ample time to file revenue taxes earlier than the deadline (which is April 15 in most years).

Employers should additionally use W-2 types to report Federal Insurance coverage Contributions Act (FICA) taxes for his or her staff all year long. By the tip of January, employers should file, for the earlier yr, Kind W-2, together with Kind W-3, for every worker with the Social Safety Administration (SSA). The SSA makes use of the knowledge on these types to calculate the Social Safety advantages to which every employee is entitled.

Tax paperwork are filed for the earlier yr. For instance, in the event you obtain a W-2 kind in January 2022 it displays your revenue earned for 2021.

The way to File Kind W-2: Wage and Tax Assertion

In case you are an worker of an organization and can obtain a W-2 to your revenue taxes, will probably be despatched to you routinely every year by your employer. Your employer may also submit a replica of your W-2 with the IRS.

The data supplied on Kind W-4 (or typically Kind W-9) when you’re first employed offers the knowledge your organization must maintain monitor of payroll, tax withholding, employer-provided advantages, and pre-tax contributions to issues like a 401(ok) retirement plan. The W-4 kind tells the employer the quantity of tax to withhold from an worker’s paycheck based mostly on the particular person’s marital standing, variety of allowances and dependents, and different elements. 

While you put together your revenue taxes, you will want to enter the information discovered in your W-2 right into a Kind 1040 particular person tax return, both by hand or electronically. On-line tax preparation software program now lets you straight import the knowledge in your W-2 out of your payroll supplier in lots of instances.

What Data Does Kind W-2: Wage and Tax Assertion Embrace?

Each W-2 has the identical fields, irrespective of the employer. W-2 types are divided into state and federal sections since staff should file taxes on each ranges. Some fields present the employer’s info, together with the corporate’s Employer Identification Quantity (EIN) (federal) and the employer’s state ID quantity. The remaining fields are largely particulars of the worker’s revenue from the earlier yr.

The worker’s complete earnings from the employer for the yr are recorded, together with the quantity withheld in taxes from the worker’s paychecks, separated into the withholding for federal revenue tax, Social Safety tax, and extra. If the worker additionally works for ideas, a discipline reveals how a lot cash in ideas the worker earned for the yr.

In case you work a number of jobs that present W-2s, that you must enter every individually.

When the worker recordsdata taxes, the quantity of tax withheld in accordance with the W-2 kind is deducted from their gross tax obligation. If extra tax was withheld than owed, a refund will likely be issued.

The IRS additionally makes use of Kind W-2 to trace an worker’s revenue and tax legal responsibility. If the revenue reported on an worker’s taxes doesn’t match the revenue reported on the Kind W-2, the IRS might audit the taxpayer. Nevertheless, taxpayers are required to report all wage, wage, and tip revenue even when that revenue shouldn’t be reported on a W-2.

The way to Learn Kind W-2: Wage and Tax Assertion

W-2 types embody each numbered and lettered packing containers that an employer should fill out and displays how a lot you earned and taxes withheld.

Bins A by means of F

The lettered packing containers on a W-2 embody the title and handle of you and your employer, your Social Safety quantity, and your employer’s EIN and state ID quantity.

Bins 1 and a pair of

Field 1 reveals your taxable revenue, together with wages, wage, ideas, and bonuses, whereas Field 2 reveals how a lot federal revenue tax your employer withheld out of your pay.

Bins 3 and 4

Field 3 particulars how a lot of your earnings had been topic to Social Safety tax and Field 4 the quantity of Social Safety tax that was withheld.

Bins 5 and 6

Field 5 spells out how a lot of your pay is topic to Medicare tax and Field 6 how a lot was withheld. The worker portion of the Medicare tax is 1.45%.

Bins 7 and eight

If a part of your pay is within the type of ideas, these packing containers present how a lot you reported in ideas (Field 7) and the way a lot your employer reported in ideas it paid to you (Field 8).

Field 9

This field was used to replicate a now-defunct tax perk, so it’s left empty.

Field 10

Field 10 studies how a lot you obtained out of your employer in dependent care advantages (if relevant).

Field 11

This field particulars how a lot deferred compensation you obtained from the employer in a non-qualified plan.

Field 12

Field 12 particulars different kinds of compensation or reductions out of your taxable revenue and a single or double letter code that corresponds to every. It’d embody, for instance, contributions to a 401(ok) plan. Codes are detailed within the IRS’ W-2 directions.

Field 13

This field has three sub packing containers designed to report pay that isn’t topic to federal revenue tax withholding, in the event you participated in an employer-sponsored retirement plan, or in the event you obtained sick pay by way of a third-party, akin to an insurance coverage coverage.

Field 14

Field 14 permits an employer to report every other extra tax info that won’t match into the opposite sections of a W-2 kind. Just a few examples are state incapacity insurance coverage taxes withheld and union dues.

Bins 15-20

The final six packing containers on a W-2 all relate to state and native taxes, together with how a lot of your pay is topic to those taxes and the way a lot was withheld.

Associated Tax Paperwork

Kind W-4 is accomplished by each worker for withholding functions. The employer makes use of the knowledge to find out how a lot tax to withhold from the worker’s paychecks. Most staff should fill out this way after they begin working for a corporation.

If the worker is paid $600 or extra for the corporate in the course of the yr, the corporate points a 1099 kind exhibiting the earnings and deductions made. This normally arrives by the tip of January of the next yr.

Kind W-2G is a tax kind {that a} gaming facility akin to a on line casino might ship you in the event you obtained winnings from playing within the prior yr.

College students obtain a 1098-E assertion for any yr by which they paid curiosity on a federal pupil mortgage. College students additionally obtain a 1098-T assertion reporting faculty tuition bills that may entitle college students to tax deductions or credit.