W-2 Form (Wage and Tax Statement)
Form W-2 (Wage and Tax Statement) is an IRS form to report wages paid to employees and the taxes withheld from them.
Purpose of Filing Form W-2
Employers must complete Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. An employer must mail out the Form W-2 to employees on or before January 31. The deadline gives these taxpayers about 2 months to prepare their return before the April 15 income tax due date.
What should be reported through W-2?
Form W-2 includes wage and salary information as well as federal, state, and other taxes that were withheld. This information is used by the employee when they complete their individual tax return using Form 1040. When an employee prepares their individual tax return for a tax year, the withholding amount from Form W-2 is subtracted from the tax due. It is possible to receive a refund from the IRS if more income was withheld than necessary.
Filing Requirements for Form W-2
Form W-2 must be completed by the employers and be in the mail to be sent to employees and electronic file transmitted to SSA by January 31. If over 250 instances of Form W-2 are being filed for the year, electronic filing is required. The form consists of six copies
Who must file?
Form W-2 is conpleted by employers who pay a wage or salary to employees. However, Form W-2 is not used for contact workers. For independent contractors, Form 1099-MISC is used to report earnings.
Late filing within 30 days of the due date incur a penalty of $30 per form. After 30 days but before August 1, the penalty increases to $60 per form (capped between $200-$500 depending on size of business). After August 1, the penalty increases to $100 per form (capped between $500-$1500 depending on size of business).
The penalty for a single incorrect Form W-2 is $250 per receiving party (capped annually at $3 million); this means a single incorrect Form W-2 to both the employer and the IRS incurs a penalty of $500. The penalty of intentionally failing to file is $500. Further penalties exist for illegible forms and for filing by paper even past the 250 form limit.
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