What is the W-2 form?
A W-2 form, also known as a salary and tax return, is the document that an employer must send to each employee and to the Internal Revenue Service (IRS) at the end of the year. A W-2 indicates the employee’s annual salary and the amount of taxes withheld from their pay checks. A W-2 employee is someone whose employer deducts taxes from their pay cheques and submits this information to the government.
What is a W-2 form for?
An employer is legally required to send a W -2 form to each employee to whom he has paid salary, wages or some other form of compensation. This does not include contract or self-employed workers, who must file taxes in different forms. The employer must send the employee the W-2 form no later than January 31 of each year, see how early w2s come out. so that the employee has enough time to file their income taxes before the deadline (which is April 15 for most years).
Employers must also use W-2 forms to declare Federal Insurance Contributions Act (FICA) taxes for their employees throughout the year. At the end of February, employers must file, for the previous year, the W-2 form, as well as the W-3 form, for each employee with the Social Security Administration (SSA). The SSA uses the information from these forms to calculate the social security benefits to which each worker is entitled. Tax documents are filed for the previous year. For example, if you receive a W-2 form in January 2020, it reflects your income for 2019.
What information does a W-2 contain?
Each W-2 has the same fields, regardless of the employer. W-2 forms are divided into state and federal sections because employees have to file taxes on both levels. There are fields that provide employer information, including the employer (federal) employer identification number (EIN) and the employer’s state identification number. The other fields focus mainly on the details of the employee’s income for the previous year.
In general, you will receive a W-2 from an employer if you have earned at least $ 600 in a given year. The employer’s total employee earnings for the year are included, of course, as well as the amount withheld in tax from the employee’s pay cheques, separated in the federal income tax deduction, social security tax and more. If the employee also works for tips, a field indicates how much tips the employee earned for the year.
When the employee files taxes, the amount of tax withheld on Form W-2 is deducted from their tax liability. If a higher tax has been withheld than the employee owes, he may receive a refund. 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 does not match the income reported on Form W-2, the IRS can verify the taxpayer. However, taxpayers are required to report all wages, salaries and tips, even if that income is not reported on a W-2.
How to read a W-2 form
W-2 forms include numbered and letter boxes that the employer must fill in and reflect how much you earned and the taxes withheld. Form W-4 is a form that individuals complete for deduction purposes; the employer uses their information to determine the amount of tax to deduct from employee pay checks. Contract employees must complete Form W-9 when they start working for a company. If they accomplish $ 600 or more of work for the business in a year, the business issues a Form 1099 showing the gains and deductions made. Students receive a Form 1098 for any year in which they pay interest on tuition or a student loan.