W2 Form (What It Is And How It Works: All You Need To Know) (2024)

Looking for a W2 Form?

What is a W2 form in simple terms?

How do you complete it?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you what W2 form means and why it matters!

Are you ready?

Let’s get started!

What Is A W2 Form

At the end of every year, a W2 form is a tax document that employers in the United States complete and send to their employees and the Internal Revenue Service.

On the employee W2 form, you will find the confirmation of how much the employee earned in wages during the year and how much the employer withheld in income taxes from the employee’s pay.

The W2 tax form shows important information relating to your income and the amount of taxes you paid to the government through your employer.

You’ll need the W2 form to file your federal and state taxes every year.

W2 Employee

When speaking of a Form W2, we must talk about a “W2 employee”!

You may have heard that someone is referred to as a W2 employee.

Essentially, a W2 employee is a person whose employer has the legal obligation of withholding income taxes directly on the employee’s paycheck.

Since the employer will send a W2 form to that employee at the end of the year, we’ll call that employee a “W2 employee”.

If you worked as a self-employed person or as a contracted person, you will not receive a W-2 Form as you will need to use other forms to report your income.

The W2 is only applicable to employees.

W-2 Form Definition

How do you define a W2 Form?

According to Investopedia, a W2 Form is defined as a “document an employer is required to send to each employee and the Internal Revenue Service (IRS) at the end of the year” and where the employer confirms the “employees’ annual wages and the amount of taxes withheld from their paychecks”.

W2 Purpose

The main purpose of using a W2 form is for the IRS to track every employee’s income and tax obligations.

Employers have the obligation to inform the IRS of the total amount all their employees have earned in the previous tax year along with how much taxes were withheld.

This way, the IRS can compute every individual employee’s tax obligations based on their total earnings and the actual amount of taxes paid.

How Does W2 Form Work

Every year, by no later than January 31st, employers in the United States must send their employees and the IRS a Form W2 where they confirm the total amount of compensation received by the employee.

On the W2 Form, the employer must also confirm the total amount of taxes withheld from the employee’s wages and remitted to the government.

The reason why employers must send the W-2 tax form before January 31st is to allow every employee enough time to use this form to file their personal income taxes.

On the IRS Form W2, you’ll also find information relating to the taxes employees paid under the Federal Insurance Contributions Act (or FICA).

Typically, the W2 form issued in the current year will reflect your total earnings and wage deductions for the prior year.

If you have not received your W2 form by January 31st of the year, you should contact your employer to get a new copy sent to you.

Content of W2 Form

No matter where you work and in what industry, all employees will receive the same W2 form.

The only difference between one employee and another’s W2 is the value that employers confirm in wages and taxes.

Typically, the content of a W2 form will include:

• Employer’s name
• Employer Identification Number
• Employer’s state ID number
• Employee’s total earnings
• Amount of taxes withheld
• Employee’s Social Security Number

Individuals working for more than one employer during a given year will receive one W2 from each of their employers.

How To Read A W2 Form

The content of a W2 form is relatively easy to understand.

To ensure that there’s no confusion, here is a quick breakdown of the W 2 form and how to read it.

I will use the latest version of the W 2 tax form so no only you can see what it looks like but we can also look at the different boxes on the document.

So, in case you are wondering what the W2 looks like, here it is:

Let’s dig deeper and understand the boxes on the document.

Boxes A through F: Employer And Employee Information

Boxes A to F provide key information about your employer and employee, as follows:

• Box A: Employee’s Social Security Number
• Box B: Employer Identification Number (EIN)
• Box C: Employer’s Name, Address, and ZIP Code
• Box D: Control Number
• Box E: Employee’s First Name, Initial, and Last Name
• Box F: Employee’s Address and ZIP code

Boxes 1 and 2: Earnings And Taxes Withheld

Box 1 and 2 relate to the total earnings paid by your employer and how much federal income tax was withheld as follows:

• Box 1: Wages, Tips, and Other Compensation
• Box 2: Federal Income Tax Withheld

Boxes 3 and 4: Social Security Wages And Taxes Withheld

Box 3 and 4 provide the details of how much you earned in Social Security wages and how much taxes were withheld, as follows:

• Box 3: Social Security Wages
• Box 4: Social Security Tax Withheld

Boxes 5 and 6: Medicare Wages And Taxes Withheld

Box 5 and 6 relate to how much you earned in Medicare wages and tips and how much your employer deducted in applicable taxes, as follows:

• Box 5: Medicare Wages and Tips
• Box 6: Medicare Tax Withheld

Boxes 7 and 8: Social Security Tip And Allocated Tips

Box 7 and 8 relate to how much you earned in tips if part of your wages is paid in tips, as follows:

• Box 7: Social Security Tips
• Box 8: Allocated Tips

Box 9: Empty

Box 9 used to reflect tax perks but now it no longer applies, so it’s empty.

Box 10: Dependent Care Benefits

Box 10 provides the information on how much you received in dependent care benefits, if you have any dependents.

Box 11: Nonqualified Plans

Box 11 provides the confirmation of how much deferred compensation you have received from a nonqualified plan.

Box 12: Other Compensation

Box 12 is used by your employer to report other types of compensation or reductions from your gross income all depending on the specific nature of your employment.

Box 13: Pay Not Subject To Withholding

Box 13 is used to report amounts that you received that is not subject to federal income tax withholding and it includes pay as a statutory employee, employer-sponsored retirement plan, or third-party sick pay.

Box 14: Other

Box 14 is an additional box allowing employers to report any other tax information that could not specifically fit into another box on the tax form W2.

Examples include disability insurance taxes and union dues.

Boxes 15-20: State And Local Taxes

Boxes 15 to 20 relate to the applicable state and local taxes where the employer confirms how much was withheld from your pay.

The boxes include the following:

• Box 15: Employer State ID Number
• Box 16: State Wages, Tips, etc.
• Box 17: State Income Tax
• Box 18: Local Wages, Tips, etc.
• Box 19: Local Income Tax
• Box 20: Locality Name

How To File W2 Form

Filing a W-2 Form is relatively simple.

Every year, by no later than January 31st, your employer must send you a copy of your W2 tax form.

At the same time, your employer sends the IRS a copy as well.

This means that your W2 form is filed directly by your employer.

When you receive your tax form W2, you’ll be able to complete your Form 1040 and file your personal income taxes.

You will need the information confirmed on your W2 to enter into your Form 1040 individual tax return.

In the past, most would complete their income tax returns manually.

Today, most people use tax preparation software allowing them to easily enter their information on their 1040 Form.

W2 Form Example

What does the W 2 form tell you?

To better understand form W 2, let’s look at an example.

Imagine that in the past calendar year, you worked for two companies.

From January to June, you worked for Company A where you earned $25,000 and paid $7,000 in taxes.

Then, from July to December you worked for Company B where you earned $30,000 and paid $8,000 in taxes.

You also had a side hustle where you earned $5,000.

In this example, your total earnings for the year are $60,000.

You will receive a W2 tax form from Company A and a second one from Company B.

For your side hustle, since it’s income that you earned outside of your employment, you will need to report that income on other forms.

Now, your W2 form for Company A will confirm all your earnings, wages, salary, tips, and income you earned only from Company A (in our example, it’s $25,000).

Company A will also confirm that it deducted $7,000 in taxes from you.

Company B will give you a Form W2 where it confirms you earned $30,000 and paid $8,000 in taxes.

When you file your income tax returns, the IRS will calculate your total tax liability based on $60,000 and will consider that you already paid $15,000 in taxes throughout the year.

W2 Form FAQs

Let’s look at a few common questions related to W2 forms.

How can I get my W2 form

Your employer must send you your W2 form electronically or by mail every year.

The deadline for you to get your W2 is no later than January 31st of every year so you have enough time to use the information on it to file your personal income tax return.

Who gets a W2 form

Anyone who worked for another person or company earning a salary, wages, or remuneration in cash or in noncash benefits exceeding $600 will get a W2 form.

W2 tax forms are not sent to contractors and self-employed individuals will get a 1099 in most cases.

What is the difference between W2 and W4 forms

A W2 form is a tax document that your employer is obligated to issue reporting your total earnings and the total amount of taxes you paid during a given tax year.

On the other hand, a W4 form is a document that employees fill out initially when they are hired giving their employers essential information about themselves allowing employers to know how much taxes to withhold on the employee’s paycheck.

On the W4 form, you’ll confirm information like:

• Tax ID number
• Marital status
• Number of allowances
• Number of dependents

What if my W2 is wrong

If you see that there’s a mistake on your W2 form, you must report that immediately to your employer.

Sometimes, employers make mistakes when issuing your tax form W2.

To avoid getting into trouble for your taxes with the IRS, make sure your employer corrects the mistake and sends the IRS a revised version of your W2 tax form.

W-2 Form Takeaways

So there you have it folks!

Every company or individual in the United States who pays remuneration to another, in cash or noncash payments exceeding $600, is required to provide a W2 form for each of their employees.

Employers must issue a W2 tax form, or a Wages And Tax Statement, to those from whom income tax, Social Security tax, or Medicare tax was withheld or that income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exception from withholding on a W4 form.

In this article, I provided you with an overview of what is W2 form, what is the purpose of a W2 form, how to get one, and how it works in general.

Now that you’re equipped with this information, good luck with your research or tax return!

I’ll let you go by providing you with a few relevant links as additional resources:

• W2 Form on IRS website
• Form W2 instructions

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