What is a W-2 Form?

A W-2 form, also known as the Wage and Tax Statement, is the document an employer is required to send to each of their employees and the Internal Revenue Service (IRS) at the end of the year. The W-2 form reports the employee's annual wages and the amount of taxes withheld from his or her paychecks. A W-2 employee is someone whose employer deducts taxes for and submits to the government.


W-2 Form

Employer Obligations for the W-2 Form

An employer is legally required to send out a W-2 Form to every employee to whom they paid a salary, wage, or another form of compensation. This does not include contracted or self-employed workers, who must file taxes with different forms. The employer must send the employee the W-2 Form on or before Jan. 31 each year, so the employee has ample time to file his or her taxes before the deadline (which is April 15 in most years).

Employers must also use W-2 forms to report FICA taxes for their employees throughout the year. By the end of February, employers must file, for the previous year, forms W-2, along with forms 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 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 2019 it reflects your income for 2018.

Key Takeaways

  • W2 forms reflect income earned from the prior year.
  • Employers use W2s to report FICA taxes for employees.
  • The IRS uses W2 forms to track the employee's tax obligation.

Components of the W-2 Form

Every W-2 has the same fields, no matter the employer. W-2 Forms are divided into state and federal sections since employees must file taxes on both levels. There are fields that provide the employer's information, including the company's Employer Identification Number (EIN) (federal) and the Employer's state ID number. The remaining fields mostly focus on the details of the employee's income from the previous year.

The employee's total earnings from the employer for the year are included, of course, along with the amount withheld in taxes from the employee's paychecks, separated into the withholding for federal income tax, Social Security tax and more. If the employee also works for tips, a field shows how much money in tips the employee earned for the year.

When the employee files taxes, the amount of tax withheld according to the W-2 form is deducted from his or her tax obligation. If more tax was withheld than the employee owes, he or she 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 doesn’t match the income reported on the Form W-2, the IRS may audit the taxpayer. However, taxpayers are required to report all salary, wage, and tip income, even if that income is not reported on a Form W-2.

Related Tax Documents

A W-4 is a form that individuals complete for withholding purposes; the employer uses its information to determine how much tax to withhold from the employees' paychecks. Contracted employees must fill out a W-9 Form when they start working for a company. If they complete $600 worth's of work or more for the company in a year, the company issues a 1099 Form showing the earnings and deductions made. Students receive a Form 1098 for any year in which they pay interest on college tuition or student loan.