The W-2 Form is a statement prepared by the employer for those who were employed at any time during the previous year. Also known as a statement of earnings or Wage and Tax Statement, the W-2 Form indicates the total gross earnings of an employee. The W-2 also shows the employee's Social Security earnings, Medicare earnings, federal taxes and state taxes withheld from wages over the previous year. This form is due to employees by January 31 of each year and is used to complete their annual tax return.
Payroll Register and W-2 Preparation
The information for W-2 tax forms will be gathered from your business payroll register. This payroll register should record each employee's wages, withholding for FICA, Medicare and Social Security. Any deductions for health savings accounts, medical plans or any other deductions should be recorded in this payroll register.
Employer Information Needed
For each W-2 tax form prepared by the employer, include the Federal Employer ID Number, the full legal name of the business, and the business mailing address. When preparing a large number of W-2 tax forms, some employers will also add a control number to help in processing and tracking. Most payroll preparation software programs will have the option to add this number to the tax forms.
Employee Earnings Reported
In box 1, the total wages, tips and any other type of compensation will be entered. Corresponding boxes will record any other amounts to be withheld. On each W-2 tax form, the employer must check the correct box to indicate an employee's participation in a retirement plan, some other non-qualified plan, or if the employee received any third-party sick pay. Elective deferrals like 401(k) and 403(b) plans are also recorded here. There are many more places to enter information like after-tax pension payments and health insurance deductions. Be sure to follow directions carefully.
Distribution of Forms
Once all the appropriate information has been double checked for accuracy, and recorded on the W-2 tax forms, it's time to send the right forms to the right places. If additional copies of any tax forms are needed, they can be picked up at a local office supply store or ordered from the IRS directly. Th employee gets copies B,C,1, and 2. The Social Security Administration gets copy A along with the employee's W3 form. Copy D is for the employer's records.
Check with a qualified tax professional or CPA for complete information regarding all IRS tax forms. Or use a payroll service like SurePayroll that automatically creates and distributes W-2s.