2022 Employer’s Guide to Form W-2
If you’ve never prepared a W-2 but need to complete it for your business, start here, with our overview of how the government uses the W-2 and how you should complete and file it.
The W-2 form is the first form of taxation most people receive in their working life. It shows the income you made in the last tax year and any taxes withheld from that income. If you are running the business, it is your responsibility to ensure that all of your employees receive accurate and timely W-2 forms.
Read on to learn how to complete W-2s and when and where to submit them.
Overview: What is Form W-2?
the IRS Form W2 is one of many information returns you must file with the IRS as part of the small business tax cycle. The form is what you use to report all salaries, payroll deductions, and employer payroll taxes for government employees. It is due each year before January 31.
W-2 vs. 1099: What’s the difference?
When hiring new people, first determine whether they will be independent contractors or employees. Your choice determines whether their tax information is reported with a W-2 or 1099 form.
Workers are generally considered contractors if they only work on specific projects and file their own taxes. They often work with more than one company.
Why is the W-2 form important for employers?
Completing the W-2 in a timely and accurate manner is important for the following reasons:
- Fines: If you fail to file your return by January 31, you are automatically fined $50 per return (up to a maximum of $197,500). After 30 days, this fine is converted to $100/return (maximum $565,000) and after August 1, it increases to $280 per return (maximum $1,130,500).
- Registration : You need historical salary information for a variety of reasons, such as planning for raises, verifying employment for mortgages, and insurance audits. It’s much easier to open a PDF and look up an employee’s name than trying to create a new report in your accounting software and find the same information. Also, the W-2 total must add up to the same number as the wages and salaries line item on your business tax return.
- Your employees need it: Employees not only need information from their W-2 to complete their return, they will also need to submit the form itself along with their federal and possibly local tax returns.
How Employers Should Prepare W-2 Forms
Follow these steps to prepare and submit W-2 forms.
Step 1: Complete employee onboarding
Part of the payroll processing cycle is onboarding all new employees and getting all government forms completed. The important form of Onboarding for our purposes in this article is the W-4.
During the onboarding process, enter W-4 information into your payroll software to properly withhold taxes during the year and file W-2s at year-end.
Step 2: Order Forms
You cannot complete the W2 online and print it to send it. Forms must be ordered either directly from the IRS or from your tax software publisher. Shapes are printed with a specific ink color for security purposes.
You can register with the Social Security Administration (SSA) and submit copies of government online form.
Step 3: Complete the forms
You can find official IRS instructions for all sorts of unusual scenarios here. We’ll go over the basics step by step.
Sections a, e and f are taken from the employee’s W-4. Items b, c, and 15 are your company information and are the same for every employee (except employees working in different states). Section d is for company records – whatever employee ID you use should go there.
Complete the remaining sections with information from your payroll or accounting software:
- Wages: Wages in box 1 is net pre-tax 401 (k) contributions and contributions to health savings regime. Social Security wages do not include deductions, but they have a ceiling of $ 132 900 (2020). the Medicare wages no ceiling and do not include deductions.
- Deductions: The federal income tax withheld is based on the number of dependents and an employee benefits declares on his W-4. The withholding of Social Security and Medicare are calculated in each pay period in the payroll process.
- Tips: Box 7 presents the advice your employee has received and you have reported. Box 8, Tips Allowed, is a calculated total — if you operate a food and beverage establishment and an employee reports tips of less than 8% of their share of food and drinks, the difference between the amount of 8% and its reported number is awarded tips.
- Box 9: This must always be empty. The tax laws have changed and this is no longer applicable.
- Box 10: Any amount that was reimbursed to employees for children or dependents.
- Box 11: Amount paid to the employee for a pension plan or deferred compensation which is not eligible under Tax Section 457.
- Box 12: There are over 30 reportable forms of deferred compensation. visit Instructions from the IRS for the codes to use for each.
- Box 13: A statutory employee is one who does not receive a normal salary. Their remuneration is quite incentive. Check the “retirement plan” box if the employee opted for a 401(k) plan. third party sickness benefits is for payments from insurance companies and other third parties.
- Box 14: This is where the employer’s share of health insurance or 401(k) contributions goes and any other compensation not reported in the other boxes.
- State and local: If the employee did all the work in one place, these boxes mimic Federal boxes. If the employee works in multiple locations and states, separate the information on different lines.
Step 4: Submit the forms
You will have six versions of each completed form W-2. Copy A and W-3 form are subject to the Social Security Administration, or online via the link above or at:
Via the US Postal Service:
Social Security Administration
Direct Operations Center
Wilkes Barre, Pennsylvania 18769-0001
(for certified mail, use postcode 18769-0002)
Via a private delivery service (FedEx, UPS, etc.):
Social Security Administration
Direct Operations Center
Attention: Process W-2
1150 E. Mountain Drive
Wilkes Barre, Pennsylvania 18702-7997
Send copy 1 to your city or state government. This may or may not be necessary. Check with the state personnel secretary for instructions and if you can use an online tax filing option.
Send copies B, C and 2 to the employee. Employee records Copy B with their tax on income and Copy 2 with the return of the state.
Copy D remains with the employer.
Step 5: complete the forms
Once all the forms and W-3 are filled, scan them together and save them in an electronic file. This is useful if forms need to be resubmitted, if an employee loses their copies, or even if you need to complete an employment verification form for an employee’s mortgage application.
Note that if an employee requests a copy of their transcript, you can head to this link to get his Online IRS transcripts. The transcripts show the entire personal tax return, not the W-2, and include information the business wouldn’t have.
Do not have the blues; do your W-2
It’s bad enough to worry about your own small business taxes. Manually filling out each individual W-2 probably isn’t worth the effort. Keep your software up to date, and let it do the heavy lifting. Now that you know how W-2 work, you can check what the software prints out.