Tax time is almost here again. If you’re a business owner with employees, it’s imperative that you understand W2 forms, including the information they should contain and how to file them with the IRS.
Filling out and filing W2 forms can be confusing, especially since the requirements tend to change every year. Still, there are five essential W-2 facts you should know in order to avoid trouble with the IRS and your employees.
Fact #1: The Purpose of a W2 Form
The W2 Form is also known as a “Wage and Tax Statement”. The purpose is to report employees’ taxable wages, Social Security and Medicare earnings, withheld federal and state taxes, and other information.
Employees submit this form when filing their annual tax returns. The IRS then knows how much income employees can legally claim and how much they still owe in taxes (if any).
Fact #2: W2 Forms Contain More Than Employee Wages
W2 forms become confusing because they require you to submit information about many different things. Here’s what they should include:
- Name, Address & Social Security number
- Total wages (include tips and/or other taxable compensation)
- Total federal, state, or locality taxes withheld
- Total Social Security wages
- Total Medicare wages
- Social Security tips & allocated tips
- Information about retirement plans sponsored by the company
- Information about special benefits
- Information about employee benefit plan deductions or any other deductions
Employees must submit this form when filing their annual tax returns. The IRS then knows how much income the employee can claim, the taxes withheld, and how much he or she still owes in taxes (if any).
Fact 3: You Must Prepare Multiple Copies
Did you know you’re obligated to prepare more than one copy of W2 forms? In fact, you should prepare six copies of each form to be distributed as follows:
- Copy A (red form) – Social Security Administration (SSA)
- Copy 1 – City, State, or locality
- Copy B – File to the IRS for the employee’s federal tax return
- Copy C – Employee’s records
- Copy 2 – City, State, or locality
- Copy D – Employer’s records
Employers will also need to submit W3 forms to the SSA, which summarize the information in each W2. It’s up to you to ensure the information is the same.
Fact 4: There is a Deadline to Distribute W2 Forms
You are required to give W2 forms to your employees by January 31st. The forms are also due to the Social Security Administration by the same date.
It’s recommended that you send W2 forms as early as possible in January so you have time to find and fix errors.
Fact 5: Getting and Filing W2 Forms
It’s important to get W3 forms from the right source. Copy A (the red copy) needs to be printed on special paper. Other than that you need to use official forms, which you can get from Create W2.
You can file W2 forms by mail, along with a W3 form.
Mail to: Social Security Administration, Direct Operations Center, Wilkes-Barre, PA 18769-0001
If you have more than 100 eligible employees, you can submit W2 forms online.
W2 Facts Can Help You Prepare for Tax Season
Tax season is no joke. As an employer, you need to stay abreast of W2 facts in order to have accurate records to submit to the IRS and your employees. It is also recommended that you use a professional tax preparer or certified public accountant (CPA).
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