IRS Form W-2, Wage and Tax Statement is a form that tallies the annual wages paid to each employee during a tax year. Your organization must prepare a W-2 for each employee who was paid at least $600 over the course of the year.
Two copies of each W-2 must be created. One copy is sent to the employee, and the other copy is filed with the IRS. W-2 forms are due by January 31 each year.
What Information Is Reported on a W-2?
The W-2 form is used to report the total payments to an employee and all taxes withheld by the employer during the tax year. The following information must be reported on Form W-2.
- The total amount paid in wages, tips, and other compensation
- The total amount withheld for federal income tax
- How much of the employee’s wage is subject to Social Security tax
- The amount withheld for Social Security tax
- How much of the employee’s wage is subject to Medicare tax
- The amount withheld for Medicare tax
- The amount paid for dependent care benefits, if any.
Note that the wages subject to Social Security and Medicare taxes may be different from an employee’s gross pay.
In states or cities that require state and local income tax withholding, the amounts withheld for state taxes and local taxes are also reported on Form W-2.
Who Needs to File Form W-2?
Any business that pays one or more employees at least $600 over the course of a year must file a W-2. Businesses must also file a W-2 for any employee for whom they withheld federal income taxes, Medicare taxes, or Social Security taxes.
A W-2 form must be filed for each employee that has earned $600 or more in that year.
Any business that files at least one W-2 form also needs to file Form W-3. Form W-3 reports the total amounts for each box across all of a business’s W-2 forms.
When Is Form W-2 Due?
Form W-2 is always due on January 31. This is the date by which employers must not only file their W-2 forms with the IRS but also send copies to their employees.
How to File Form W-2
Most of the information that you need to fill out Form W-2 will come from your payroll software.
First, you must provide the employee’s name, address, and social security number. If this information is not already in your payroll software, it can be obtained from the employee using Form W-4.
You will then need to know the total amount paid to an employee as well as how much was withheld for federal income taxes, Medicare taxes, and Social Security taxes. This information is typically reported on an employee’s pay stub for each pay period. If an employee received these benefits, you will also need to report the amount paid.
In addition, Form W-2 requests information about each employee in Box 13. Check the appropriate boxes if the employee is a statutory employee, is enrolled in an employer-sponsored retirement plan, and/or received sick pay from a party other than your business.
Once all of your W-2 forms are completed, you can file them electronically through the Social Security Administration’s Business Services Online portal. Paper submissions are only allowed if your business is filing fewer than 250 W-2 forms—and they must be accompanied by Form W-3. If you file electronically, the Business Services Online portal will fill out and file Form W-3 for you automatically.
You must also give a copy of an employee’s W-2 form to that employee. The form can be given to them in person or by mail.
Why Do Employees Need Form W-2?
Employees need a copy of their completed Form W-2 so that they can accurately file their own taxes. The information reported on Form W-2 is a component of the information required by IRS Form 1040, Individual Income Tax Return.
W-2 vs. 1099-NEC
Forms W-2 and 1099-NEC (non-employee compensation) are similar, but there are important distinctions. First, Form W-2 is filed for each employee a business has. Form 1099-NEC is filed for each independent contractor or vendor to whom a business makes payments.
Importantly, businesses are not required to withhold employer payroll taxes for independent contractors—Form 1099-NEC does have a space to report withholdings if money was withheld for any reason. So, Form 1099-NEC is mainly used to report the amount paid to an independent contractor.
Like Form W-2, Form 1099-NEC must be filed and a copy sent to each independent contractor by January 31 each year.
Form W-2 reports the total amount paid to an employee as well as the amounts withheld for income taxes, Medicare tax, and Social Security tax. Businesses must file one Form W-2 for each of their qualifying employees annually by January 31. A copy of Form W-2 is filed with the IRS and another copy is sent to each employee.