As a small business owner, you should be able to answer “What is a W-2 form?” A W-2 form is a crucial document that reports an employee’s annual taxable wages and the amount of tax withheld from wages.
Continue reading to learn more about what is a W-2, who gets a W-2, what information it includes, and where you should send it.
What is a W-2 form used for?
Form W-2, Wage and Tax Statement, reports information about an employee’s annual wages. You must send a copy to your employees and the Social Security Administration (SSA). The W-2 form lists the wages you paid the employee throughout the year.
Form W-2 shows an employee’s gross wages and withheld taxes. It can also include other information such as deferred compensation, dependent care benefits, contributions to a health savings account, and tip income.
If you paid an employee during the year, you must complete a Form W-2. You must still provide a W-2 form, regardless of whether the employee worked for one day or one year. Legally, you must send out W-2 forms to any employees you paid a salary, hourly wages, or other forms of compensation.
Send Form W-3, Transmittal of Wage and Tax Statements, along with Form W-2 to the SSA. Form W-3 is a summary of all W-2 forms and must be signed by the employer.
Independent contractors do not receive Form W-2. Contractors receive Form 1099. Check the rules from the IRS to determine if your worker is a W-2 employee or a 1099 contractor.
Copies of Form W-2
There are multiple copies of Form W-2 you must distribute. It’s important to know where to send each copy.
- Copy A: Mail or e-file to the SSA, along with Form W-3.
- Copy B: Send this copy to your employee. The employee will file this copy with their federal income tax return.
- Copy C: Send this to the employee for their records.
- Copy D: Keep this copy for your business’s records.
- Copy 1: If required, file with the state, city, or local tax department.
- Copy 2: Send this to the employee. The employee will file this copy (if required) with their state, city, or local tax department.
What’s on Form W-2?
The standard information on each Form W-2 includes:
- Employee’s Social Security number
- Employee’s personal information, such as their name, address, and zip code
- Your business’s name, address, zip code, and Employer Identification Number (EIN)
- Wages, tips, and other compensation
- Taxes withheld (e.g., Social Security, Medicare, and income taxes)
Filling out Form W-2
Print Form W-2 on official copies of W-2 forms. You can purchase the forms from the IRS or a local office supply store. A sample of Form W-2 is available for viewing on the IRS website, but you cannot print it.
If you use payroll software, check with your payroll provider about electronic W-2 forms for employees.
While filling out Form W-2, make sure the name, address, and Social Security number for each employee is accurate. Be sure your business’s name, address, and EIN are correct.
You will want to make sure dollar amounts on Form W-2 are reported correctly. Boxes that report money should not include a dollar sign symbol. Use a decimal point to divide the dollars from cents (e.g., 1000.00).
To avoid Form W-2 errors, be sure to carefully review each form before sending to the SSA and your employees.
Using online payroll software can help you fill out Form W-2.
The Form W-2 and Form W-3 filing deadline for employers is January 31. If you fail to file on time, the IRS can issue financial penalties.
Use Patriot’s online payroll software to handle your business’s day-to-day payroll calculations. And if you want us to take care of withholding and depositing taxes, opt for our Full Service Payroll service. Start your free trial today!
This article is updated from its original publication date of 10/7/2011.
This is not intended as legal advice; for more information, please click here.