W-2 forms, an employee’s Wage and Tax Statement, is the formal document used for reporting taxable earnings. You can use the document to report the amount of tax withheld for Medicare, Social Security, and state as well as local governments. Form W-2 is a crucial document at tax time. 

Employers have to prepare a W-2 form each year for their employees, and it shows an employee’s total gross earnings, Medicare earnings, Social Security earnings, and state and federal taxes withheld from that employee.

Keep in mind that the IRS (Internal Revenue Service) does not use this crucial document just for tax purposes, but also over the course of the employee’s lifetime. The SSA often uses the earnings history of an employee in order to determine both eligibility and benefits on retirement.

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What Are W-2 Forms?

First, employers use the W-2 Form, also known as Wage and Tax Statement, for reporting information about an employee’s yearly wages. They have to send a copy to their employees as well as the Social Security Administration.  

Form W-2 is important as it shows an employee’s gross wages as well as withheld taxes. The form may also include other important information, like deferred compensation, contributions made to a health savings account, dependent care benefits, and tip income.

You have to complete a Form W-2 if you paid an employee during the year. You have to provide a W-2 form to the employee, regardless of whether your employee worked for a single day or one year. And keep in mind that you must send out W-2 forms to all employees. These include employees who receive a salary, hourly wages, or any other compensation from your business. 

W-2 Forms – Contents

The standard information on a Form W-2 includes the following:

• Employee’s personal information, like their name, zip code, and address
• Employee’s Social Security number
• Your business’s name, zip code, address, and EIN (Employer Identification Number)
• Wages, bonuses, tips, and other forms of compensation
• Taxes withheld (such as Medicare, Social Security, and income taxes)

W-2 Employees’ Obligations 

If you are an employee, you have to report all wages earned from your job or jobs on your annual tax return.  In most cases, the minimum amount for receiving any kind of income tax reporting document is about $600 in earnings paid.

W-2 Employers’ Obligations 

If you are an employer, you have to prepare a W-2 Form for each eligible employee. You also have to provide copies to the IRS (Internal Revenue Service) and the SSA (Social Security Administration).  You have to mail or hand-deliver your Form W-2s to your employees no later than Jan. 31 each year for the prior tax year.

Attaching Your Form W-2

Keep in mind that when you complete your tax returns and are ready to file, you have to attach a copy of your W-2. And if you are filing the tax return via mail, then you have to place a copy of the form on the front of your tax return.