For starters, form W2 might be a little too complicated to handle. But you can never escape the responsibility, especially when it’s nearing “tax season.” So, whether you have basic knowledge about it, this article will give a comprehensive understanding of Form W2.
What is Form W2?
Form W2 is the paper known as wage and tax statement. Employers have this document to be sent to every employee along with the Internal Revenue Service before the new year approaches. W2 can also be identified as a report compiles an employee’s recorded wages and taxes from their rightful paychecks.
Workers that have this form are called W2 employees and are an indication that their employer has the right to deduct taxes from their salary. Moreover, they are obligated to submit the information and data to the authority.
Who Files Form W2 (Wage and Tax Statement)?
Employers are those that have the permission to send out wage and tax forms to their employees. That’s because they are the ones who pay the remuneration, salary, or other types of compensation. This would mean that those who are self-employed and contract employees are omitted.
Those who file form W2 use the document to report yearly FICA taxes of their employees. Occasionally, employees can pass the last year’s papers before the end of January. The file should also include form-W3, and SSA.
How to File Your W2 (Wage and Tax Statement)?
Suppose that you’re an employee. The W-2 documents should be sent to you every year as they will serve as your form. Your employer should also process a copy of your W2 and the IRS. All the information that is provided on your Form W-4 or occasionally W-9 should contain the data of your payroll, provided compensations, tax withy, and pre-tax plan contributions.
As you prepare all the requirements and income taxes in your document, you should be able to put the information on your W-2 inside an individual tax return called Form 1040. You can do it either manually or electronically. As you may know, there are now online tax processing tools that can assist you in importing data directly from your W-2.
Reading Form W2 ((Wage and Tax Statement)
You can see that all W2 forms contain lettered and numbered boxes that you (as an employee) must fill out. As stated earlier, it will reflect the wage and tax information you had throughout the year.
The lettered boxes from A-F request your personal information like name, social security number, you and your company address, and even the state and EIN ID number.
The first box is all about your taxable income like salary, wage, bonuses, and tips. On the other hand, Box 2 displays how much your employer can withhold from your paycheck through federal income tax.
Box 3 shows all your earnings that were subjected to SS tax. Box 4, on the other hand, details the total amount of your SS tax that was withheld.
Box 5 specifies the ratio of your wages that is susceptible to Medicare tax, and it is specified in the 6th box how much was deducted. The fraction of the Medicare tax that is paid by employees is 1.45 percent.
These parts show how much you noted in tips (Box 7) as well as how much your company reported in tips it paid to you (Box 8). If you receive a portion of your pay in the type of tips, such boxes demonstrate how much you reported.
This box was previously used to represent a tax benefit that is no longer available, so it has been left empty.
Box 10 shows how much money you earned from your company in dependent care assistance (if applicable).
This box contains information about the amount of deferred compensation you obtained from your company under a nonqualified plan.
Additional compensation or deductions from the taxable wage are listed in Box 12, along with the letter codes that conform to each type of compensation or deduction. The W-2 instructions from the Internal Revenue Service provide a detailed explanation of the codes.
These three subspaces are intended to help you disclose pay that is not exempt from federal income withholding taxes, if you took part in an employer-sponsored retirement account, and if you obtained sick pay through an insurance policy.
If a company wants to disclose any other extra tax data that does not fit into other parts of a W-2 form, they can do so in Box 14.
The last six parts on a W-2 form are linked to state or local taxes, and they detail how much of your wages are susceptible to this taxation or how much is precluded from your paycheck.