What Is Form W-2: Wage and Tax Statement?

What Is Form W-2: Wage and Tax Statement?

Form W-2, also known as the Wage and Tax Statement, is a document an employer sends to each employee and the Internal Revenue Service (IRS) and shows income earned from an employer and the amount of taxes withheld from an employee's paycheck so taxpayers can file federal and state taxes. A W-2 employee is someone whose employer deducts taxes from their paychecks and submits this information to the government.

Who Files Form W-2?

An employer must send out a W-2 form to every employee to whom they paid a salary, wage, or other form of compensation. This does not include contracted or self-employed workers, who file taxes with different forms. The employer must send the employee the W-2 form on or before January 31 each year, so that the employee has time to file income taxes before the deadline, commonly April 15.

Employers use W-2 forms to report the Federal Insurance Contributions Act (FICA) taxes withheld. By the end of January, employers must file, for the previous year, Form W-2, along with Form W-3, for each employee with the Social Security Administration (SSA). The SSA uses the information on these forms to calculate the Social Security benefits each worker is entitled to.

Information Included on a W-2

Employees receive a W-2 for their income taxes, sent annually by their employer. Taxpayers will receive multiple W-2s if they work for more than one employer. The IRS also gets a copy. Taxpayers input the data found on the W-2 into a Form 1040 individual tax return, either by hand or electronically. Regardless of the employer or company, every W-2 includes the same information:

• State and federal tax sections since employees must file taxes on both levels.
• Employer's information, including the company's Employer Identification Number (EIN) (federal) and the employer's state ID number.
• Employee's income from the previous year.
• Taxes withheld from the employee's paychecks are separated into the withholding for federal income tax, Social Security tax, and more.
• Tips, if any, the employee earned for the year.

How to Read Form W-2

W-2 forms include numbered and lettered boxes that an employer must fill out to reflect how much you earned and taxes withheld. Employees will receive separate W-2s for federal, state, and local taxes.

Form W-2 is available on the IRS website.

• Boxes A-F: The lettered boxes on a W-2 include the name and address of the employee and employer, Social Security number, and employer's EIN and state ID number.
• Boxes 1-2: Box 1 shows taxable income, including wages, salary, tips, and bonuses, while Box 2 shows how much federal income tax the employer withheld.
• Boxes 3-4: Box 3 details the earnings subject to Social Security tax and Box 4 shows the amount of Social Security tax withheld.
• Boxes 5-6: Box 5 details how much pay is subject to Medicare tax and Box 6 how much was withheld. The employee portion of the Medicare tax is 1.45%.
• Boxes 7-8: If any income is in the form of tips, these boxes show how much was reported and subject to tax.
• Box 9: This box was used to reflect a now-defunct tax perk, so it is left empty.
• Box 10: Reports how much an employee received from their employer in dependent care benefits (if applicable).
• Box 11: Details how much deferred compensation was received from the employer in a non-qualified plan.
• Box 12: Shows other types of compensation or reductions from taxable income and a single or double letter code for each. It might include contributions to a 401(k) plan. Codes are detailed in the IRS' W-2 instructions.
• Box 13: This box has three sub-boxes designed to report pay not subject to federal income tax withholding for an employer-sponsored retirement plan such as a SIMPLE IRA, and sick pay via a third-party, such as an insurance policy.
• Box 14: An employer can report any additional tax information that may not fit into the other sections of a W-2 form, such as state disability insurance taxes and union dues.
• Boxes 15-20: The last six boxes on a W-2 relate to state and local taxes, including how much income is subject to these taxes and how much was withheld.

Related Tax Documents

Form W-4 is completed by employees when they start working for a company. The employer uses the information to determine how much tax to withhold from paychecks. The information on Form W-4 (or sometimes Form W-9) helps track payroll, tax withholding, employer-provided benefits, and pre-tax contributions to things like a 401(k) retirement plan. 

When taxes are not withheld, an employee will receive a 1099 form showing the earnings and any deductions made. Individuals must report this income on their annual tax filing forms. This usually arrives by the end of January of the following year.

Form W-2G is a tax form that a gaming facility such as a casino may send if a taxpayer received winnings from gambling in the prior year.Students receive a 1098-E statement when they've paid interest on a federal student loan. Students also receive a 1098-T statement reporting college tuition expenses that might entitle students to tax deductions or credits.

The Bottom Line

Form W-2 is an IRS form that employers must send to an employee and the IRS every year. The form reports an employee's annual wages and the taxes withheld. Employees also use the form to file their taxes every year.