If you’ve ever worked as an employee, you’ve probably received a W-2 tax form at some point. As an employee, you use your W-2 to do your taxes or hand it off to your accountant.
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But when you’re an employer, there’s a lot more to a W-2. You’re responsible for completing and sending W-2s to your employees and the government by January 31 each year.
W-2s are a necessary part of payroll, so it’s essential that you understand the ins and outs of the form. Here’s a step-by-step guide on exactly how to fill out a W-2, along with details on your requirements as an employer.
What is a W-2?
The Form W-2 Wage and Tax Statement is how companies report each employee’s annual wages, deductions, and tax withholdings to the IRS. It’s like a pay statement for the entire year.
You only need to complete W-2s if you have employees. If you hire independent contractors and pay them more than $600 in a tax year, then you’ll fill out a 1099 form instead.
A W-2 and W-4 are not the same form.
- A W-4 is a tax form your employees complete when you first hire them or if their filing status changes.
- A W-2 is a tax form you complete and send to your employees and the government every year.
What do I need to do with the W-2 form?
As an employer, you need to complete a W-2 for each of your employees. Okay, but when do employers have to give W-2 forms to employees? You’ll send each employee a copy and submit all your W-2s to the Social Security Administration by January 31. You’ll also send a copy to your city, county, or local tax agency.
Where do I file it?
In total, you’ll prepare six copies of the W-2 for each employee. Here’s what you’ll do with each copy:
- Copy A: Send to the Social Security Administration (not the IRS).
- Copy 1: Send to your state, city, or local tax department.
- Copy B, C, and 2: Send to your employee.
- Copy D: Keep for your records.
If keeping track of where to submit six forms makes your head spin, you can opt to use a payroll service like Gusto, which files the forms (yes, all of them) for you.
What do my employees do with it?
Your employees use their copies of the W-2 to file their taxes by entering the amounts reported on the form on their federal and state tax returns.
Then, they’ll submit copy B with their federal tax return and copy 2 with their state, city, or local tax return. They’ll keep copy C for their records.
How do I prepare and file a W-2 form?
You have three options when it comes to preparing your W-2s:
- Complete and print them yourself.
- Use an online filing service.
- Use a payroll service that prepares and files them for you.
1. Complete, print, and mail them yourself
While the IRS has a sample W-2 form and W-2 instructions, you’ll need to obtain hard copies if you decide to complete the forms yourself. You can’t just download and print PDF copies of the blank forms. Instead, you’ll purchase the forms from an office supply store or order them from the IRS.
Also, you can’t reuse forms from the previous year, like a W-2 from 2019, because the forms have the tax year printed on them. You’ll need to purchase a new set of forms each year.
Next, you’ll decide what software you’ll use to complete and prepare the forms for printing. After the forms are complete, you’ll send each one to the appropriate recipients.
Here are the IRS guidelines for printing W-2 forms:
- Use black ink in 12-point Courier font.
- Don’t complete by hand or use script or italic fonts.
- Don’t use a dollar sign or comma.
- Use decimal points for cents.
- If a box doesn’t apply, leave it blank.
2. Use an online filing service
Using an online filing service requires less preparation because you don’t need to get hard copies of the forms. Instead, you’ll enter all the necessary information into the software program.
The service then electronically files the forms with the Social Security Administration and the correct state, city, and local tax department. It also prints and mails copies to your employees.
3. Use a payroll service
Almost all payroll services prepare and file your W-2s for you. Using a payroll service is the most hands-off approach since your payroll processor stores your data and takes care of the forms for you.
All you do is review your payroll data at the end of the year for errors.
How do I fill out a W-2?
Before you start preparing your W-2s, gather the following information:
- Your federal Employer Identification Number (FEIN)
- Company name
- Company address
- Each employee’s full name, address, and Social Security number
- Total amounts of everything you paid and withheld in taxes for each person on your team
Now follow the W-2 instructions below, and let’s talk about all those numbered boxes!
a. Employee’s Social Security number: Enter your employee’s Social Security number (you can find this on their W-4). If your employee doesn’t have a Social Security number but has applied for one, write “Applied for” or, if e-filing, enter all zeros (000-00-0000). Once your employee receives their number, complete a corrected W-2 (the W-2c) for the employee with their number.
b. Employer Identification Number (EIN): Enter your EIN here. If you don’t have an EIN, you must apply for one. If you’ve applied for one but haven’t received your number yet, write “Applied for” here.
c. Employer’s name, address, and ZIP code: The address you enter here should be the same address you use on Form 941.
d. Control number: This box is optional and only used if you want to assign a number to your W-2 forms to identify them.
e. Employee’s name: Enter the name on your employee’s Social Security card, which will be their first name, middle initial, and last name. Don’t use titles such as “Dr.” or a suffix such as “Jr.” or “Sr.” unless it appears on their Social Security card.
f. Employee’s address and ZIP code: Enter your employee’s address here.
1. Wages, tips, and other compensation: Put the total amount (before payroll deductions) that you paid your employee during the tax year. Include wages, tips, bonuses, commissions, and other forms of compensation, such as certain fringe benefits. Don’t include your employee’s contributions to their 401(k) or 401(b) plan.
2. Federal income tax withheld: Enter the total amount of federal income tax you withheld from your employee’s wages for the year.
3. Social Security wages: Put your employee’s wages that are subject to Social Security tax here. Don’t include tips here. In 2019, the Social Security wage base is $132,900, which means any wages your employee earned after this amount are not subject to Social Security tax. If your employee earned more than $132,900, put $132,900 here.
For 2020, the Social Security wage base is $137,700. You’ll use this wage base to file W-2s in 2021, for the 2020 tax year.
4. Social Security tax withheld: Put your employee’s portion of Social Security tax that you withheld. Be sure to include Social Security tax withheld on tips. Don’t include the amount you paid in employer taxes.
5. Medicare wages and tips: The same wages and tips from box 3 are also subject to Medicare tax. Unlike Social Security tax, there’s no wage base for Medicare tax. So, if your employee earned more than $132,900, then you would put the total amount earned, not $132,900.
6: Medicare tax withheld: Enter the total amount of your employee’s portion of Medicare tax that you withheld. Be sure to include any additional Medicare tax that you withheld. Don’t include your share of Medicare tax.
7. Social Security tips: Put the tips that your employee reported to you, even if you didn’t collect Social Security tax for those tips. Keep in mind that the Social Security wage base is $132,900, and boxes 3 and 7 shouldn’t total more than $132,900.
8. Allocated tips: If you’re in the food or beverage industry, enter the amount of tips allocated to the employee here. Don’t include this amount in boxes 1, 3, 5, or 7. For more information on allocating tips, see the instructions for Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips.
9. Verification code: If you’re e-filing your form and you see a code in this box, enter this code into the software program when prompted. Don’t enter a code on paper returns.
10. Dependent care benefits: If you’ve paid for benefits, such as child care, to your employee, enter the total amount here. If you paid more than $5,000 in dependent care benefits, enter $5,000 in box 10 and the amount over $5,000 in boxes 1, 3, and 5.
11. Nonqualified plans: Enter distributions from a nonqualified plan or nongovernmental section 457(b) plan here. Be sure the amount entered here is included in the amount in box 1. Don’t include sick or vacation pay here.
12a–d. W-2 box 12 codes: At first glance, box 12 on the W-2 can be pretty confusing. These boxes are for reporting compensation that has special tax qualifications, such as contributions to a 401(k) plan. For each lettered box, enter the code that corresponds with the type of compensation your employee received and the amount.
Here’s a list of all the W-2 box 12 codes:
Once you’re done with the the box 12 codes, go to box 13.
13. Checkboxes: Check all the boxes that apply to the employee.
- Statutory employee: Check this box if your employee’s earnings are subject to Social Security and Medicare taxes, but you don’t withhold federal income tax.
- Retirement plan: Check this box if your employee participated in your retirement plan.
- Third-party sick pay: Check this box if a third-party sick-pay payer is also filing a W-2 for the employee.
14. Other: Put additional taxes and deductions here. Be sure to label each item. Examples of what you would put here include:
- Disability insurance taxes withheld
- Union dues
- Uniform payments
- Health insurance premiums deducted
- Nontaxable income
- Educational assistance payments
15. State, Employer’s state ID number: Put the two-letter abbreviation of the state and your employer’s state ID. If you’re entering information for more than one state, enter the second state name and ID number under the dotted line.
16. State wages, tips, etc.: Put the amount of your employee’s state taxable pay. Depending on your state, this amount may not be the same as box 1.
17. State income tax: Enter the amount of state income tax withheld.
18. Local wages, tips, etc.: Enter your employee’s total locally taxable wages, if applicable.
19. Local income tax: If you withheld local tax from your employee’s pay, enter the amount withheld here.
20. Locality name: Enter the name or code of the local area where you’re reporting your employee’s wages.
How do I submit the W-2?
Whew! Now that you’ve made it through all the boxes, it’s time to submit your W-2s.
Besides sending copies to your employees, you’ll send your W-2s to the Social Security Administration (SSA) and your state, city, or local tax department. You must submit your W-2s to your employees and the SSA by January 31.
Mailing your W-2s to the SSA
If you are filing paper forms, you’ll submit copy A (the red copy) to the SSA.
In addition to submitting original copies of your W-2s, you’ll also need to send a W-3, Transmittal Wage and Tax Statements. The W-3 form reports all the information on your W-2s in one place.
Like the W-2 form, you can’t download and print a PDF of the W-3 form. Instead, you’ll need to purchase the form from an office supply store or the IRS.
The address to mail your W-2s and W-3 is:
Social Security Administration
Direct Operations Center
Wilkes-Barre, PA 18769-0001
E-filing your W-2s
You can also e-file your W-2 forms online through the SSA’s Business Services Online section. The SSA prefers that you file electronically, which is free. Plus, when you e-file, you don’t have to complete a W-3 because the SSA generates one for you.
You have two options to file online:
- Create fill-in versions of the form and print copies for your employees and your state, city, or local government.
- Upload your wage files from your payroll or tax software.
If you’re filing more than 250 W-2s, then you’re required to e-file.
What if I make a mistake?
If you make a mistake, either on your W-3 or on a W-2, you can file a corrected return with the Social Security Administration.
- To correct a mistake on a W-2, file a W-2c and a W-3c with the updated amounts.
- To correct an error on your W-3, file a W-3c.
You can submit a W-2c or W-3c online at the SSA website.
Don’t forget to send copies of these corrected forms to your employees and state, city, or local tax agency.
What if I file my W-2s late?
If you don’t file your W-2 on time, you’ll pay a penalty. The IRS imposes a penalty if you:
- File your W-2 after the deadline
- Don’t include all the required information on the form
- Include incorrect information
- File paper forms if you’re required to e-file
- Don’t include or report the wrong taxpayer ID number
- File a paper W-2 that isn’t machine-readable
The penalty is based on when you eventually file the corrected W-2. Here’s a breakdown of the penalty amounts:
|$50 per form||If you correctly file within 30 days of the due date|
|$110 per form||If you correctly file more than 30 days after the due date and by August 1|
|$270 per form||If you file after August 1, do not file a correction, or do not file your W-2s|
|$15 per form||If you’re a small business with an average of less than $5 million in gross receipts over the past three tax years, and you file the corrected form within 30 days of the due date|
And that’s everything you need to know about how to fill out Form W-2 at the end of the year. Hopefully this guide makes your requirements a lot clearer, so you can have an easier time filing W-2s for your team.