As per IRS, every employer engaged in a trade or business who pays remuneration, including non-cash payments of $600 or more for the year for an employee for the services performed by them must file a Form W-2 for each employee from whom:
- Income, social security, or Medicare tax was withheld
- Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding allowance or had not claimed exemption from withholding on Form W-4, Employee’s Withholding Allowance Certificate.
For the concerned employee, this form plays a vital role while filing returns. To allow you ample time to prepare your return file efficiently, the IRS requires the employer to submit the W-2 forms no longer than January 31st of each year.
The W-2 forms, however, are not applicable for self-employed or contractual workers. In this case, you will receive a Form 1099 rather than the W-2 one.
The W-2 form is divided into boxes that reflect on the various aspects of your income. In Box one, you will find your salary payments along with the annual wage with the amount of salary withheld from it in Box 2.
A very small portion of your salary is subject to Social Security tax, and hence, usually, the third box depicts an amount far lesser than your actual annual income. The other two include your wages subject to Medicare tax and Social Security taxes that are withheld and information on your state income tax withholding, if applicable.
Importance of tax withholding
The amount of tax withheld by your employer reflected in the W-2 form is important because the same amount is then deducted from your total tax bill. This happens at the time of your return filing.
It’s only following this calculation that you can determine whether you are eligible for tax refunds or need to make additional tax payments.
Verifying your name and social security number
The identifying information section on the W-2 form essentially serves as a tracking feature for the IRS. Should your return filing amount not be in sync with your W-2 form details, the IRS will question you about the same.
The IRS can also figure out any discrepancies in your employer’s corporate tax filing using these forms.
It is indeed important to ensure that your details are correctly filled in by your employer and any errors should be immediately reported.
Don’t forget to attach a copy of W-2 form when filing your tax returns. Even if you are e-filing, make sure you send along a copy of your W-2 form to enjoy an efficient filing process along with the eligible refunds.
If you are having troubles with your filing process, feel free to drop in a mail at firstname.lastname@example.org or call us at (888)-482-0279.