The Basics of Completing a W2 Form
A W2 is a tax form that every employer in the United States must fill out annually, and then provide a copy of that form to employee(s) during tax season. Tax season begins on January 1st of every year and ends on April 15th, unless that day falls on a weekend or holiday in which case would be extended until the next business day. Although employees have until April 15th to file their taxes, employers must ensure that every W2 form is postmarked by January 31st.
All employers may electronically file their employee’s earnings with the IRS by visiting www.socialsecurity.gov/employer web page. You can choose to print the W2 forms for each of your employees from this page to file the same information with the state for local taxes, and to distribute among your employees. The IRS has created a publication with instructions and an example which are all laid out below.
What Information Should You Obtain From Employees?
You’ll receive a great deal of the information that you’ll need for W2’s from your employees by having them complete a W4 form at the time of hiring. Each of your employees will be required to give you their personal information so that you can report their earnings to the appropriate channels and withhold the proper amount of taxes. Check out the list below to make sure that you have all of the info you’ll need at the time of hiring. Employees can, and should, update you with any new information throughout the year when it comes to their whereabouts so that you can ensure they receive their form during the tax filing season.
• Full Name That Matches Social Security Card (Employee should communicate name changes in the event they get married during the year.)
• Date of Birth
• Marital Status
• Social Security Number
On the W4 form, employees will need to decide what they would like their income tax withholdings to be, which may be determined by dependants or marital status among other factors. Employees should and can change their income tax withholdings throughout the year by either filling out a new W4 or updating the form they filled out at the time of hiring.
What Information Is Provided By Employers?
When you begin to fill out W2’s for your employees that you will file with the IRS, the information that you provide is equally as important as the information your employee(s) were required to provide at the time of employment. You’ll need to include some information pertinent to your business, such as your EIN (Employer Identification Number), as well as the employee’s earnings and withholdings. Check out the sample PDF for a visual of what the form will look like to help ensure you meet all IRS standards.
• Employer State ID Number
• Company Name and Address
• Employee’s Name and Address
• Employee’s Gross Earnings (Amount before any taxes were withheld.)
• Federal Income Tax Withheld
• State Income Tax Withheld
• Medicare Tax Withheld
• Any Local Taxes That Were Withheld
• Any Amounts Distributed to Employee’s Pension
• Any Amounts Allocated for Dependent Care
• Any Other Relevant Information To Employee (Such as Social Security Tips or Retirement Plans)
• “Other Box” (Used for other taxes or deductions not covered on standard W2 Form)
While the list looks long and intimidating, it’s all standard information that you’ll know long before you begin the task of reporting information for each of your employees. If you have a tax accountant, he or she will likely have all of the information they need to prepare the forms including the employee’s information as well as all of the employer information. If you prefer to do all of your own accounting for your business, there is computer software that will keep track of what your employee(s) earned, how much income taxes were withheld, how many dependents any one given employee has and their exemption status.
One important note to remember is that the IRS may penalize you if you file forms that are not scannable. Copy A on the above-mentioned PDF will not be accepted by the IRS, nor will copies that have erroneous mistakes or scratched out information. You must submit a clean form in black ink to the IRS as the official filing form. A completed Copy B of the PDF form is an acceptable to the IRS with all of the employee’s information.
You may also incur other penalties if you fail to send out W2’s to your employee(s) by January 31st of the tax season. It is imperative that you cooperate and follow all laws and guidelines.
When does a company NOT have to send W2’s out?
There are some circumstances where employers do not have to send out W2’s. This would be true if your hired help worked as a contractor instead of an employee. A contracted worker is paid differently than an employee and has different tax responsibilities.
In this case, you would pay the contracted worker a base pay–say $15 per hour–for all worked hours. If the contracted worker worked a total of 20 hours, you would pay him or her $300 for the week without taking out any taxes. The contracted worker is responsible for paying in their own taxes in an arrangement that follows all standards, rules and laws set forth by the IRS, but typically the contracted worker will make quarterly payments to the IRS.
At the end of the year, you will not send the contracted worker a W2. The reason for this is because you did not withhold any taxes from his or her check. Instead, you will send out a 1099 form. There are different types of 1099 forms, such as Forms A, G and C; you can go to the official IRS website to order tax forms that fit your needs.