Filing W-2 forms is an important part of every small business owner's year-end tax responsibilities. These documents provide a detailed record of employee earnings and tax withholdings, ensuring compliance with IRS regulations and equipping employees with the information they need to file their income taxes.
While the process of creating and distributing W-2s may seem straightforward, accuracy is essential to avoid penalties, employee confusion, or delays. Whether you're assembling W-2s for the first time or looking to simplify the process, understanding their purpose and the steps involved can make tax season far less stressful.
This article will cover everything you need to know about W-2s, including their purpose, filing deadlines, and how to complete them accurately. Follow along to avoid common pitfalls and file with confidence.
Before we go any further, let’s quickly define W-2s and identify their purpose.
The W-2 form, officially known as the “Wage and Tax Statement,” is a tax document used by employers to report an employee’s annual earnings and the taxes withheld from those earnings. Simply put, it provides a summary of how much an employee was paid and how much his or her employer has already sent to the IRS for income, Social Security, and Medicare taxes.
A W-2 helps employees file their income tax returns by clearly breaking down their wages and tax payments. For employers, a W-2 ensures compliance with IRS regulations and reporting requirements, including filing copies of the W-2 with the Social Security Administration (SSA). In addition to being sent to employees, employers must also submit the W-2 to the SSA and, in some cases, state tax agencies. Corrections can be made later using Form W-2c if errors occur.
Not everyone receives a W-2. This form is specifically for employees who earn wages through an employer-employee relationship. Independent contractors and freelancers don’t get a W-2; instead, their earnings are reported on a 1099 Form.
Employers must issue W-2s to any employee who:
These forms must be sent to employees and filed with the IRS by Jan. 31 each year.
It’s easy to confuse W-2s with W-4s, but they serve very different purposes. A W-4 Form is completed by employees when they start a new job or update their tax withholding preferences. This form tells employers how much tax to withhold from each paycheck. A W-2 Form is completed by employers at the end of the year to summarize an employee’s total wages and taxes withheld. Think of the W-4 as a setup tool for withholding and the W-2 as the annual report that shows how it all played out.
Filling out a W-2 form is fairly self-explanatory, given you have some basic information about your business, including its employer identification number (EIN), state ID number, etc. Perhaps the main challenge to filling out the form correctly is to avoid errors when entering names and numbers in the fields. Always double-check the boxes to make sure you haven’t entered the wrong figures or misspelled any employees' names or addresses.
Through the next section, we’ll provide you with a detailed breakdown of a W-2’s individual fields. If you have any specific questions, we suggest you access IRS Publication 15, the “Employer’s Tax Guide,” which is largely recognized as the go-to resource when it comes to filling out a W-2.
Boxes A-F capture essential details about the employer and employee.
These boxes calculate and report federal taxable income, Social Security wages, and Medicare wages.
Boxes 7-14 address specific earnings or deductions, such as tips, dependent care benefits, and special contributions.
These boxes focus on wages and taxes subject to state and local regulations.
The number of copies sent out, the date they must be sent/received, and when they’re returned are all regulated by the U.S. government.
Each employer that pays individual workers $600 or more during the year must issue a W-2 form. In total, employers must produce six copies of every W-2 form, which must be distributed accordingly:
You can file W-2 forms either electronically or on paper. However, more often than not, electronic filing is faster and more secure. In fact, electronic filing is required by law for businesses filing 10 or more W-2s.
Employes must distribute W-2 forms by Jan. 31 each year. They must also file W-2s with the SSA by the same date. If Jan. 31 falls on a weekend or holiday, the deadline moves to the next business day.
If you’re unable to meet the Jan. 31 W-2 filing deadline, you can request an extension.
The IRS grants W-2 filing extensions only under specific circumstances, such as a natural disaster or another catastrophic event; death or serious illness of the responsible party; unavailability of necessary records or data; and unexpected issues with the business's filing system. Extensions are not granted for reasons like simple oversight or lack of preparation.
To request an extension, you’ll have to complete Form 8809 before the Jan. 31 filing deadline to be considered. The form can be submitted electronically through the IRS’s Filing Information Returns Electronically (FIRE) system or mailed to the address listed on the form's instructions.
A detailed explanation of the reason for the delay must accompany the request, including any supporting evidence, such as correspondence showing how circumstances outside your control prevented timely filing.
The IRS will typically respond within a few weeks. Approval is not guaranteed and is based on the reason and documentation provided. Even with an extension, you’re still required to provide W-2 forms to employees by Jan. 31. The extension applies only to filing forms with the SSA. If the extension is denied, file the W-2 forms as soon as possible to minimize penalties. Late filing penalties increase the longer you delay and are based on the number of forms and days late.
Mistakes on Form W-2 do occur, and when they do, it’s essential to correct them promptly to stay compliant and avoid potential penalties. Errors, such as incorrect employee names, Social Security numbers (SSNs), or wage amounts, require filing a corrected form, called Form W-2c, Corrected Wage and Tax Statement. Form W-2c is necessary to fix errors on previously filed W-2 forms, including issues with:
If the mistake involves an employee’s address or is caught before sending Form W-2 to the SSA, different correction methods may apply (explained below).
File corrections as soon as you identify an error. Penalty amounts for incorrect W-2 filings depend on how quickly you file the correction. However, the IRS may waive penalties if you can demonstrate reasonable cause.
As a small business owner, tackling W-2 Forms doesn't have to be overwhelming. By understanding their purpose, meeting deadlines, and ensuring accuracy, you can streamline the process and avoid costly penalties.
The key to simplifying this annual task lies in preparation and the right tools. Using reliable software to track employee time, schedules, and payroll all in one place can make managing W-2s and other tax responsibilities far easier. OnTheClock offers a user-friendly solution to do just that. Having these tools available in one platform will help you stay organized and compliant throughout the year. Simplify your business operations today and enjoy stress-free tax seasons ahead by adding OnTheClock to your toolbox today. For more information, visit www.ontheclock.com.
The W-2 form is completed by employers, not employees. If you're an employee, you don't fill it out — you simply receive it. If you’re an employer, you’ll need to use IRS-approved W-2 forms; enter accurate employee information, including name, address, and Social Security number; report wages, tips, and other compensation; and more.
The W-2 itself doesn’t ask you to file "0" or "1" — this refers to the allowances you claimed on your W-4 form, which determines how much federal income tax your employer withholds from your paycheck. A taxpayer who claims 0 withholds the maximum amount of taxes, which may result in a bigger tax refund. An individual who claims 1 withholds less, leaving them with more take-home pay but potentially a smaller refund or tax bill.
No, not all states require unemployment insurance, but most do. It’s important to check the rules for your state.
To file your W-2 form, you first must receive one (typicaly by Jan. 31). Attach a copy of your W-2 to your federal and state tax returns. File your taxes either online (e.g., IRS e-file) or through a tax preparer.
Keep the W-2 for your records for at least three years.
Yes, the name on your W-2 must match the name on your Social Security card. Mismatches can delay processing of your tax return and may result in errors in your Social Security earnings record. If your name has changed, update your Social Security information before your employer issues the W-2.
You’ll need a W-2 from every employer you worked for during the tax year. As an employer, you’ll need to distribute six copies of each W-2 – one for the Social Security Administration (SSA), one to report state or local income taxes withheld, one for the employee to retain, one for the employee to file, one for the employee to file locally, and a final one for the employer’s records.
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