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What HR Professionals Need To Know About Form W-2

Everything HR pros need to know about the W-2 form!

July 21, 2022

Whether you’re new to HR or a veteran, you understand how much paperwork you have to deal with on a daily basis. One misfile or non-compliant form and the legal ramifications could be severe. With specific paperwork, the consequences aren’t only felt by the company or HR but also by the employee.

Since all employees file taxes, employers must provide employees with a W-2 Wage and Tax Statement. Failure to provide employees with a W-2 can result in the employee delaying the filing of their taxes and your company facing fines from the IRS.

Keep reading to learn everything you need to know to complete and file the W-2 form correctly.

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What is a W-2 Form?

The W-2 provides employees with necessary tax filing information like wages and taxes withheld. Employers must send W-2 tax forms to employees and the IRS every year.

The law requires and enforces deadlines to allow ample time for employees to file their taxes. The deadline for filing taxes in most situations is April 15.

The W-2 might not be issued to every person on a company’s payroll. Issue the form W-2 to those employees earning wages, salaries, or tips. But, any freelance and contract employees should be issued a 1099-MISC.

Use the form 1099 for any income or earnings not reported on a W-2. This includes bank account interest (1099-INT), investment dividends (1099-DIV), and retirement account dividends (1099-R).

Both the W-2 and the form 1099 are used to complete a tax return like Form 1040.

What Do W-2 Forms Look Like?

What does the w-2 form look like?

Lettered Boxes

W-2 forms look like a pretty standard tax document. The first section (the lettered boxes) contains personal information about the employee. Along with the employees’ personal information, the employer’s address and EIN are also required on the W-2. An EIN, or Employer Identification Number, gets assigned to businesses by the IRS. An EIN, also known as a Federal Tax Identification Number, identifies the business to the IRS. It is the responsibility of the business to apply for an EIN.

The lettered boxes you will see are:

  • A – Employee’s social security number
  • B – Employer identification number (EIN)
  • C – Employer’s name, address, and ZIP code
  • D – Control number
  • E – Employee’s name (first, initial, last, suffix)
  • F – Employee’s address

You will be able to transcribe most of the information from the employee’s W-4. However, it may be a good idea to take this time to ensure all employees’ personal information is up-to-date.

Numbered Boxes

Then, there’s the numbered box section. This is a breakdown of how much money the employee made during the year as well as their tax withholdings. This information includes total wages, earnings, taxes, and other withholdings.

Here’s a quick rundown:

  • Box 1: The employee’s total wages for the year. This includes your regular pay, any bonuses or commissions, and any other compensation.
  • Box 2: The amount of federal income tax that was withheld from the employee’s paychecks throughout the year.
  • Box 3: Employee earnings subject to social security tax withholdings.
  • Box 4: The amount of social security taxes withheld.
  • Box 5: Employee earnings subject to Medicare tax withholdings.
  • Box 6: The amount of Medicare taxes withheld.
  • Box 7: Total tips reported for the year.
  • Box 8: Tips allocated by the employer that are not included in boxes 1, 3, 5, or 7
  • Box 9: Advance Earned Income Credit (EIC) payments – note, this box is no longer used, hence why it is grayed out.
  • Box 10: Pre-tax dependant care benefits
  • Box 11: Deferred compensation income distributed to the employee from an employer’s non-qualified compensation plan.
  • Box 12: This can include any number of deferred compensation or benefits. Coded A through HH, these entries include designated Roth contributions under a section 403(b) plan, nontaxable combat pay, adoption benefits, and more.
  • Box 13: Reports if the employee participated in an employer-sponsored retirement plan, or received sick pay through a third party, or worked as a statutory employee.
  • Box 14: “Other” refers to less common situations that impact employee taxes, such as union dues, health insurance premiums deducted, educational assistance payments, railroad retirement taxes, and more.
  • Boxes 15-20: State and local tax information

As you can see, the numbered boxes on a W-2 form provide a lot of information about employee earnings and taxes for the year.

When Do W-2 Forms Have to Be Sent Out to Employees?

Ah, the end of the year. A time for reflection, celebration… and the beginning of tax season. W-2s must be issued to employees no later than January 31st each year. So if you’re scrambling to get your forms together, take a deep breath and remember that you’ve got until the end of January.

Filing an Employee’s W-2

As mentioned, employers must send the W-2 to employees before January 31. However, there is more to filing a W-2 than handing out a copy to the employee and mailing one to the IRS.

There are six copies HR professionals need to file for the W-2. They are known as Copy A, Copy 1, Copy B, Copy C, Copy 2, and Copy D. Don’t worry, it’s not as confusing as it sounds!

  • Copy A goes to the Social Security Administration by email or mail
  • Copy 1 (if required) goes to the employer’s local tax department
  • Copies B, C, and 2 are all sent to the employee
  • The employer keeps copy D for at least four years

The IRS governs the proper distribution of the W-2 tax form and provides instructions on how to complete the form online.

Common W-2 Errors

When it comes to HR, paperwork almost really does only count in horseshoes. Each form must be filled out and filed correctly to avoid serious fines and penalties.

Some common mistakes with payroll that can muck up a W-2 include:

  • Improperly classifying of employees as contractors
  • Failure to withhold federal and state taxes
  • Late filings and tax payments
  • Terrible record keeping

That last error can lead to real trouble. Records are crucial for both the IRS and HRs. There are certain documents HR professionals must keep for a specific time frame.

For W-2, employers must keep a record of each employee’s W-2 for at least four years. Records can be either a hard copy on or off-site or electronic. It is beneficial to ensure the records are easily searchable and retrievable to avoid lengthy audits.

Form W-2 and You

Nothing can mess up your week in HR more than finding out a W-2 tax form was filed incorrectly or contained incorrect information. Understanding the W-2 tax form, how to complete it, and how to file it will make your HR tasks that much easier.

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