Tax Form W-2 With Calculator & Pen

Tax Basics: Form W-2

This article was last edited on 10/29/2019. For updated information on Form W-2, visit https://www.irs.gov/forms-pubs/about-form-w-2.

Once you’ve started hiring employees for your business, you’ll file Form W-2: Wages and Tax Statement for each member of your team every year. This form tells the IRS and worker what you’ve paid the person during the year and how much you’ve withheld in taxes. You’ve probably received a W-2 in the past. But, if this is the first time you’re filing the forms, you might have some questions about how to complete them. Keep reading to learn more about how and when to file Form W-2.

Basic information

  • Box a – Enter the worker’s Social Security number.
  • Box b – Enter your company’s Employer Identification Number (EIN).
  • Box c – Enter your business’s legal name and address.
  • Box d – If you’re filing your forms through payroll software, you’ll generally be assigned a control number. This box is optional and used to identify an individual form.
  • Box e – Enter the employee’s full legal name.
  • Box f – Enter your team member’s address.

Read also: 5 Reasons Your Small Business Needs Payroll Software

Wage and tax information

  • Box 1 – Enter the total taxable wages paid to the worker during the year. This amount will include things like their regular payment rates, bonuses, tips the staff member has reported to you, and certain fringe benefits. Because it only accounts for taxable wages, don’t include elective deferrals, like contributions to 401(k) or 403(b) plans.
  • Box 2 – Show the total federal income tax you withheld from the team member’s paychecks during the year.
  • Box 3 – Enter all wages paid that were subject to Social Security tax. Do not include tips reported.
  • Box 4 – Show the total Social Security tax you withheld from the employee’s paychecks during the year. Read also: A Beginner’s Guide to Social Security Taxes
  • Box 5 – Like Social Security, not all wages are subject to Medicare tax. Enter the wages paid that were subject to the tax. But, include any tips the worker received.
  • Box 6 – Show the total amount of Medicare tax you withheld, including Additional Medicare Tax, from the staff member’s payments during the year.
  • Box 7 – Enter any tips your worker reported to you during the year. The sum of Box 3 and Box 7 should not exceed the Social Security wage base, which is $132,900 for the tax year 2019.
  • Box 8 – If you operate a large food or beverage establishment, enter any tips you allocated to the worker.

Read also: Employment Taxes

Deductions

  • Box 10 – Enter the total dependent care benefits provided under a dependent care assistance program, such as an employer-sponsored daycare facility.
  • Box 11 – Show any distributions to the worker from a nonqualified or nongovernmental section 475(b) plan. You should also include these distributions in Box 1.
  • Box 12 – Use Box 12 and the corresponding code to enter additional tax and deduction information. Codes include:
    • Code A – any Social Security tax incurred on tips that you couldn’t collect because the team member didn’t have enough funds available
    • Code B – any Medicare tax incurred on tips that you couldn’t collect because the worker didn’t have enough funds available
    • Code C – the taxable cost of group-term life insurance over $50,000
    • Code D – elective deferrals under a 401(k) cash or deferred arrangement plan
    • Code E – elective deferrals under a section 403(b) salary reduction agreement
    • Code F – elective deferrals under a section 408(k)(6) salary reduction simplified employee pension (SEP)
    • Code G – elective deferrals and employer contributions, including non-elective deferrals, to any governmental or nongovernmental section 457(b) deferred compensation plan
    • Code H – elective deferrals under section 501(c)(18)(D) tax-exempt organization plan
    • Code J – nontaxable sick pay paid by a third party
    • Code K – 20% excise tax on excess golden parachute payments
    • Code M – uncollected Social Security tax on the taxable cost of group-term life insurance over $50,000 for former team members
    • Code N – uncollected Medicare tax on the taxable cost of group-term life insurance over $50,000 for former team members
    • Code P – excludable moving expense reimbursements paid directly to the worker
    • Code Q – nontaxable combat pay
    • Code R – employer contributions to an Archer MSA
    • Code S – salary reduction contributions under a section 408(p) simple plan
    • Code T – total paid or reimbursed for qualified adoption expenses under an adoption assistance program
    • Code V – income from the exercise of non-statutory stock options
    • Code W – employer contributions to a health savings account (HSA)
    • Code Y – deferrals under a section 409A nonqualified deferred compensation plan
    • Code Z – income under a nonqualified deferred compensation plan that doesn’t satisfy section 409A
    • Code AA – designated Roth contributions under a section 401(k) plan
    • Code BB – designated Roth contributions under a section 403(b) plan
    • Code DD – the cost of employer-sponsored health coverage, including both your and your worker’s contributions
    • Code EE – designated Roth contributions under a governmental section 457(b) plan
    • Code FF – permitted benefits under a qualified small-employer health reimbursement arrangement (QSERHA)

Additional information

  • Box 13 – Check all the boxes that apply:
    • Statutory employee – an independent contractor who is treated by statute as an employee and whose earnings are subject to Social Security and Medicare tax withholdings
    • Retirement plan – if the team member was an active participant in a qualified retirement plan
    • Third-party sick pay – only if you are a third-party sick pay payer filing Form W-2 for a customer’s employee or if you’re an employer reporting sick pay payments made by a third party
  • Box 14 – If you included 100% of a vehicle’s annual lease value in your worker’s income, enter it here. You can also use Box 14 to share any other pertinent information with your team member.

State wages and taxes

  • Box 15 – Enter the two-letter abbreviation for your state and your state EIN. You can report up to two states and localities on a single W-2. If you need to report wage and tax information to more than two states or localities, you will need to file a second form.
  • Box 16 – Report the employee’s wages subject to state income tax withholding, including tips reported.
  • Box 17 – Show the amount of state income tax you withheld from the staff member during the year.
  • Box 18 – Enter the total wages subject to local income tax withholding, including tips reported.
  • Box 19 – Report the amount of local income tax you withheld from the worker during the year.
  • Box 20 – Enter the locality’s name.

Do you need to file Form W-3?

If you’re filing Forms W-2 by paper, you’ll also need to file Form W-3 with the forms. According to the IRS, “complete a Form W-3 Transmittal only when filing paper Copy A of Form(s) W-2, Wage and Tax Statement.” If you’re electronically filing your forms W-2, don’t file Form W-3 because the IRS and Social Security Administration (SSA) will receive the information automatically.

You’ll use Form W-3 to report the number of forms you’re filing at one time. You’ll also include the total wages paid, federal income tax withheld, Social Security and Medicare taxes withheld, and state and local wage and tax information.

When to File

W-2 forms are due by January 31 of the following year. For example, forms for the 2019 tax year are due to the Social Security Administration (SSA) and your team by January 31, 2020.

  • Copy A goes to the SSA
  • Copy 1 must be filed with your state, city, or local tax agency
  • Copies B, C, and 2 are sent to your employee
  • Copy D stays with you for your tax records

Unfortunately, there are penalties for filing the forms late. Learn more about possible fines.