What Is Form W-2: Wage and Tax Statement?
Form W-2, also known as the Wage and Tax Statement, is a document an employer sends to each employee and the Internal Revenue Service (IRS) and shows income earned from an employer and the amount of taxes withheld from an employee's paycheck so taxpayers can file federal and state taxes. A W-2 employee is someone whose employer deducts taxes from their paychecks and submits this information to the government.
Key Takeaways
- Form W-2 reflects an individual's income earned and taxes withheld from the prior year to be reported on income tax returns.
- Employers use W-2s to report FICA taxes for employees.
- The IRS uses W-2 forms to track individuals' tax obligations.
Who Files Form W-2?
An employer must send out a W-2 form to every employee to whom they paid a salary, wage, or other form of compensation. This does not include contracted or self-employed workers, who file taxes with different forms. The employer must send the employee the W-2 form on or before January 31 each year, so that the employee has time to file income taxes before the deadline, commonly April 15.
Employers use W-2 forms to report the Federal Insurance Contributions Act (FICA) taxes withheld. By the end of January, employers must file, for the previous year, Form W-2, along with Form W-3, for each employee with the Social Security Administration (SSA). The SSA uses the information on these forms to calculate the Social Security benefits each worker is entitled to.
Tax documents reflect earnings and deductions for the previous year. A W-2 form in January 2024 shows income earned in 2023.
Information Included on a W-2
Employees receive a W-2 for their income taxes, sent annually by their employer. Taxpayers will receive multiple W-2s if they work for more than one employer. The IRS also gets a copy. Taxpayers input the data found on the W-2 into a Form 1040 individual tax return, either by hand or electronically. Regardless of the employer or company, every W-2 includes the same information:
- State and federal tax sections since employees must file taxes on both levels.
- Employer's information, including the company's Employer Identification Number (EIN) (federal) and the employer's state ID number.
- Employee's income from the previous year.
- Taxes withheld from the employee's paychecks are separated into the withholding for federal income tax, Social Security tax, and more.
- Tips, if any, the employee earned for the year.
How to Read Form W-2
W-2 forms include numbered and lettered boxes that an employer must fill out to reflect how much you earned and taxes withheld. Employees will receive separate W-2s for federal, state, and local taxes.
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Form W-2 is available on the IRS website.
- Boxes A-F: The lettered boxes on a W-2 include the name and address of the employee and employer, Social Security number, and employer's EIN and state ID number.
- Boxes 1-2: Box 1 shows taxable income, including wages, salary, tips, and bonuses, while Box 2 shows how much federal income tax the employer withheld.
- Boxes 3-4: Box 3 details the earnings subject to Social Security tax and Box 4 shows the amount of Social Security tax withheld.
- Boxes 5-6: Box 5 details how much pay is subject to Medicare tax and Box 6 how much was withheld. The employee portion of the Medicare tax is 1.45%.
- Boxes 7-8: If any income is in the form of tips, these boxes show how much was reported and subject to tax.
- Box 9: This box was used to reflect a now-defunct tax perk, so it is left empty.
- Box 10: Reports how much an employee received from their employer in dependent care benefits (if applicable).
- Box 11: Details how much deferred compensation was received from the employer in a non-qualified plan.
- Box 12: Shows other types of compensation or reductions from taxable income and a single or double letter code for each. It might include contributions to a 401(k) plan. Codes are detailed in the IRS' W-2 instructions.
- Box 13: This box has three sub-boxes designed to report pay not subject to federal income tax withholding for an employer-sponsored retirement plan such as a SIMPLE IRA, and sick pay via a third-party, such as an insurance policy.
- Box 14: An employer can report any additional tax information that may not fit into the other sections of a W-2 form, such as state disability insurance taxes and union dues.
- Boxes 15-20: The last six boxes on a W-2 relate to state and local taxes, including how much income is subject to these taxes and how much was withheld.
Related Tax Documents
Form W-4 is completed by employees when they start working for a company. The employer uses the information to determine how much tax to withhold from paychecks. The information on Form W-4 (or sometimes Form W-9) helps track payroll, tax withholding, employer-provided benefits, and pre-tax contributions to things like a 401(k) retirement plan.
When taxes are not withheld, an employee will receive a 1099 form showing the earnings and any deductions made. Individuals must report this income on their annual tax filing forms. This usually arrives by the end of January of the following year.
Form W-2G is a tax form that a gaming facility such as a casino may send if a taxpayer received winnings from gamblingin the prior year.Students receive a 1098-E statement when they've paid interest on a federal student loan. Students also receive a 1098-T statement reporting college tuition expenses that might entitle students to tax deductions or credits.
How Do Employees Know if They've Had Enough Tax Deducted During the Year?
When the employee files taxes, the amount of tax withheld according to the W-2 form is deducted from their gross tax obligation. If more tax was withheld than owed, a refund will be issued. The IRS also uses Form W-2 to track an employee’s income and tax liability. If the income reported on an employee’s taxes doesn’t match the income reported on the Form W-2, the IRS may audit the taxpayer. Taxpayers must report all salary, wage, and tip income even if that income is not reported on a W-2.
How Much Money Do You Need to Make to Get a W-2?
Individuals commonly receive a W-2 from an employer if they earn at least $600. Contracted individuals or independent contractors are not considered employees and receive a 1099 instead of a W-2.
What Is the Difference Between a W-2 and a W-4?
A W-4 provides an employer with an employee's tax ID number (usually SSN), marital status, number of allowances and dependents,and how much tax to withhold with each paycheck. The W-4 is filled out when an employee is hired or if any changes must be made to filing status or withholding. The W-2 is filled out by employers at the end of the tax year and sent to employees to input on their tax returns.
The Bottom Line
Form W-2 is an IRS form that employers must send to an employee and the IRS every year. The form reports an employee's annual wages and the taxes withheld. Employees also use the form to file their taxes every year.
