If you have employees, you are responsible for many tasks like running payroll, withholding payroll taxes, and distributing IRS Form W-2. As you might know by now, Form W-2 can be uber confusing. Who receives a form? Where do you send it? When is it due? Get the answers to these questions and more by reading up on IRS Form W-2 below.
What is IRS Form W-2?
Before we dive into all the juicy details about Form W-2, let’s briefly recap its purpose. So, what is Form W-2?
Employers must use Form W-2, Wage and Tax Statement, to report information about employees’ annual wages. You must send a copy of Form W-2 to each employee. And, you are responsible for sending a copy of the form to the Social Security Administration (SSA).
Form W-2 shows an employee’s gross wages and the taxes you withheld from those wages. The form might also include other information, such as tip income or health savings account (HSA) contributions.
In addition, you must send Form W-3, Transmittal of Wage and Tax Statements, with Form W-2 to the SSA. Form W-3 is a summary of all Forms W-2.
Your burning questions about Form W-2, answered
With so much to remember about Form W-2, it can be easy for details to slip your mind. To simplify things, we’ve rounded up some Q & A’s below to organize IRS Form W-2 details and information.
Who receives Form W-2?
You must create a Form W-2 for each employee you paid during the year. This includes employees who no longer work for your business. And, you must provide a standard W-2 form to any relative or family member you employ.
Do not provide Form W-2 to any independent contractors you paid during the year. A contractor is not considered an employee of your business. Instead, you must distribute Form 1099 to any applicable contractor.
If you’re unsure if a worker is an independent contractor vs. employee, check with the IRS or complete Form SS-8 to find out the worker’s status.
What is included on Form W-2?
Before you can learn how to generate a W-2, you need to know what’s on it. Form W-2 typically includes the following information:
- 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)
You might need to also fill out additional information on the form. For example, you will see boxes that say allocated tips, nonqualified plans, and dependent care benefits. If applicable, be sure to fill in additional information on the form.
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How do you fill out Form W-2?
Before filling out the form, you should learn how to read a W-2 form. While filling out the form, double-check to make sure each employee’s name, address, and Social Security number are accurate. You must also check that your business’s name, address, and EIN are correct.
When you fill out Form W-2, format the dollar amounts correctly. Do not include a dollar sign symbol when filling in dollar amounts on the form. Use a decimal to divide the dollars from cents. For example, a box listing Medicare wages should look like this: 1234.56.
To avoid Form W-2 errors, carefully review each form before sending it to your employee and the SSA.
If you use payroll software or have a payroll provider, check with them about electronic W-2 forms for your employees.
Where can you get W-2 forms?
Print Form W-2 information on official copies of W-2 forms. You can typically purchase the forms from the IRS or any local office supply store.
You can view a sample of Form W-2 online on the IRS’s website. However, you cannot print the sample form for use.
Where do you send Forms W-2?
Again, you must send copies of Form W-2 to your employees and the SSA. Form W-2 has multiple copies, so it’s crucial that you know where to send each copy.
Here’s a list of the copies you’re responsible for distributing and who you must send each copy to:
- 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.
When is Form W-2 due?
Complete and send Form W-2 to your employees by January 31. And, you need to send Form W-2 and W-3 to the SSA by January 31 each year. If you miss the January 31 deadline, the IRS can issue financial penalties.
You can either send in your Forms W-2 and W-3 by mail. Or, you can e-File your forms online through the SSA.
If January 31 falls on a holiday or weekend, Form W-2 is due on the following business day instead.
What are common Form W-2 errors?
Even the most seasoned small business owners make Form W-2 mistakes. When filling out Form W-2, make sure you don’t make these common Form W-2 errors:
- Using an outdated form
- Sending Form W-2 to the IRS (instead of the SSA)
- Filing Form W-2 late
- Submitting a handwritten W-2 form
- Formatting mistakes (e.g., ink color and font size)
- Downloading and using Form W-2 from the IRS website
- Cutting, folding, or stapling Form W-2
- Using dollar signs
- Not using decimals for dollar amounts
If you do make one of the above errors, don’t panic. You can send a corrected form if you make a mistake. Use Form W-2c to make any Form W-2 corrections. Check the instructions beforehand to find out what type of corrections you can make using the form.
How has the coronavirus impacted Form W-2?
According to the IRS, employers must report any paid sick or family leave wages given to an employee in Box 14 on Form W-2 or in a separate statement provided with Form W-2.
There are three types of paid sick or family leave wages that you must separately report (if applicable) in Box 14:
- Sick leave wages subject to the $511 per day limit because of care the employee required
- Sick leave wages subject to the $200 per day limit because of care the employee provided to others
- Emergency family leave wages up to $200 per day (maximum $10,000 over a 10-week period)
If applicable, employers must separately state each wage amount from above (e.g., emergency family leave wages) on Form W-2, Box 14 or on a separate statement.
If you provide a separate statement and the employee receives a paper Form W-2, include a paper statement. If the employee receives an electronic Form W-2, provide the statement in the same manner and at the same time as Form W-2.
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This article was updated from its original publication date of October 15, 2014.
This is not intended as legal advice; for more information, please click here.
