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A Basic Guide To Form W-2

An employer is responsible for multiple responsibilities. They function in any organization, from recruiting to managing the prevailing staff efficiently. The managerial role played by employers holds back a lot of information and data about the organization. Looking into recruiting, outsourcing, employee satisfaction, distribution of compensation and benefits, and being a communicating body on behalf of the organization. 

And just like other responsibilities comes employers’ submission of legitimate tax forms. Form W2 is one of the crucial taxation forms suggested by the IRS and filed by employers of every prominent organization. In this blog, we’ll look into the descriptive details of form W2. 

What is a Form W-2

Form W-2 is called the Wage and Tax Statement. Form W-2 is an IRS-suggested taxation form filed by employers of organizations located in federal territory and meeting recommended parameters to be eligible for the form. For example, certain parameters could be defined as a particular amount an employer has paid to their respective employees in a year. 

The payments could be done through remunerations like compensation, dependent care fund, contribution to health saving account, and tip income or benefits. This form keeps an intact record of taxes that employers withhold during employee service. The employers are obliged to share a copy of the filing of Form W-2 with the employee and the Social Security Administration. 

Purpose of W-2 

IRS Form W-2 comprises information about an employee’s aggregated income earned throughout the year, taxes withheld from the proportion of income, and a record of benefits and compensations provided by the organization in the course of services. In addition, all mandated federal and state taxes and counted in while filing this form. Who should fill out Form W-2? Employers pay their employees in the form of salary, wages, and other compensations as a part of the employment relationship. 

Contents of Form W-2 

The form consists of a very particular pattern. The contents are targeted toward recording information about the employer and the employee. The financial inputs are given clear emphasis in the form. The gradual layout of the form is divided into two sections: the state and federal. Certain sections would record information regarding respective taxation concerning the area. As a part of the employer’s information, Form W-2 records EIN (Employment Identification Number) and the employer’s state ID number. 

As part of employee information, employees’ income from the previous year is recorded. Separate sections to record total earnings, withheld taxes from the employee’s paycheck, federal income tax, social security tax, and benefits like tips if earned during one year. Employees’ taxes are deducted from their paychecks based on gross tax obligations. IRS Form W-2 helps in keeping track of employees’ income and taxation liabilities. 

Reporting Requirements

Primarily, the employers file Form-2 for the employees who’ve provided their services in exchange for annual payments. Employers who’ve paid more than $600 in the face of paychecks, salary, or wages are accountable for filing Form W-2.

Secondly, the form consists of 6 copies in total. Copy A is submitted by the employer to the Social Security Administration, also Form W-3, which summarizes and records employees’ income from SSA and IRS perspectives. Copy B is sent to the employee by the employer, and this copy records the information regarding federal income tax returns. Copy C is also sent to the employee by the employer and can retain later for record-keeping purposes. Finally, the employer retains copy D for later record-keeping purposes. Copy 1 will be filed only when the employer’s state or local income tax returns exist. Copy 2 will be filed only when the employee’s state or local income tax returns exist. 

Penalties under Form W-2

The penalty for intentionally failing to file a Form W-2 is $500. The penalty for filing a single incorrect form is $250, which reflects that a single incorrect form to an employee and the IRS levies a penalty of $500. 

Late filing within 30 days of the due date incurs a penalty of $30 per form. The gradual amount could differ depending on the organization’s size or firm. The number of penalties increases from $30 to $60 if the filing is done post 30 days of the due date but before 1 August. The gradual number of penalties could range from $200-500 depending on the size and scale of the firm or organization. After 1 August, the per form penalty increases to $100. The gradual number could range from $500-to 1500, depending on the size and scale of the firm or organization. 

Guidelines suggested by IRS for Form W-2

The IRS requires employers to report employee wage and salary information by filing Form W-2. Form W-2 records information about federal, local, state, and other withheld taxes from employees’ paychecks. Other fringe benefits like adoption and dependence care, health insurance, health saving account contributions, and more are also recorded while filing Form W-2. Employees must have a precise filing of Form W-2 as it records their tax return information. In addition, employers must comply with the filing statements of SSA and IRS authorities. 

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