What Business Owners Need to Know About W-2 Form Key Takeaways The W-2 form is significant for the preparation of the tax return. It includes information such as your income, health insurance, savings account, and retirement plan. There are various boxes in the form where you need to fill in the details like social security, Federal tax, etc. In case you find an error after filling up, you are required to request a correction form. Make sure that you fill your tax on time and correctly to avoid penalties from the IRS.
The IRS requires employers to provide salary and wage information with the W-2 form, which outlines every employee’s wage and tax statement. As an employer, you are required to
create a W-2 form and provide it to your employees.
Details about the amount of state and federal tax withheld from the employee check are also present. It includes health savings accounts, dependent care assistants, adoption, and health insurance. The W-2 is vital for the preparation of the tax return.
How the W-2 Form Works
The W-2 Form doesn’t only show how much you were paid. It includes other details like how much you have contributed to your retirement plan.
There will also be information on the amount your employer paid for health insurance and what you got under the dependent care benefits.
The following are what you are supposed to fill in the boxes provided:
Box 1 – Indication of how you were paid in tips, wages, and other compensation Box 2 – The federal income tax that was withheld Box 3 – How much of what you filled in Box 1 was subject to social security tax Box 4 – Indicates the social security withheld from your pay Box 5 – How much of what was in Box 1 goes to Medicare tax Box 6 – The Medicare tax withheld from pay Box 7 and 8 – if you made money through tips, seven will indicate how much has been reported in tips, and eight shows the amount your employer allocated you in tips Box 10 – Indicates the amount your employer paid for dependent care benefits. Box 11 – Deferred compensation from a non-qualified plan that comes from your employer. Box 13 – This has three checkboxes. Only tick the one that applies to you. Indicates whether you are an employee not subject to federal tax income. It also includes information on your participation in a retirement plan. Box 14 – Any tax information not in your W-2 boxes may be reported in this box. This includes disability insurance and union dues. Boxes 15-20 – Your local and state income go here with two-letter abbreviations of the state with your employer’s ID number assigned by the state. What Can You Do if You Find Errors on Your W-2?
One of the most common errors people encounter is misspelled names. Should there be this or any other error on your form, like the wrong dollar amount or incorrect social security number, an employee must begin by informing the employer.
Some other things that you can carry out to reduce the possibility of an error are to use black color ink on the form as other inks are too light for the scanners to print. Do not use dollar signs on the money amounts.
This is followed by requesting a corrected form. Remember that the IRS will likely charge an employer a fine if the error involves a significant item or a dollar amount.
Do You Know? The Wage and Tax Statement aka W-2 form till 1965 was known as Withholding Tax Statement. Documents People Mix Up with the W-2
Most people need clarification on the W-2 with other documents like the W-4 and the 1099 forms. Let us try to clear up the confusion with these forms.