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Being an employer isn't easy, and beyond the everyday aspects of managing people, employers must consider how to compliantly hire, pay, and withhold taxes from their employees.

This process can become even more complicated for remote employers with employees living in multiple states or countries worldwide. When employees are distributed remotely, employers will need to ensure each employee has the appropriate taxes withheld based on where they're living. Failure to do so can put both the employer and employee at risk.

For employers who operate within the United States, developing an understanding of the W-2 for employment is crucial, as this is the primary form that will need to be issued to employees living in the U.S.

Continue reading to learn what a W-2 Form is, when to issue W-2 employee forms and other information on this essential tax document.

Who files W-2 forms?

Whether you choose to file W-2 online forms or mail the physical documents, every employer with American employees (including digital nomads who may move between states or countries within a single tax year) will need to file W-2 forms for every individual employed by them at the end of each tax year.

Individuals for whom you will be expected to file a W-2 Form include:

An employee from whom you withheld the following taxes:

Social security
Income tax
Medicare tax

Anyone for who you paid more than $600 in a single year for services rendered
Anyone for whom you would have withheld income tax if they hadn't been exempt

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How do I file a W-2 Form?

To successfully file a W-2, you must ensure the relevant parties receive a copy of every employee's W-2 Form. Below is a list of where you will need to send a copy of the employee's W-2 forms by January 31:

Send a copy to the Social Security Administration (SSA)
Send a copy to your local, city, or state tax department
Send a copy to the employee
Keep a copy for your records for at least four years after filing

When do I submit W-3 Forms with W-2 Forms?

A W-3 Form is a document that shows your total annual spending on payroll and withholding. You must submit W-3 Forms with the W-2 Forms of the following groups:

An employee from whom you withheld the following taxes:

Social security
Income tax
Medicare tax

Any employee for whom you paid more than $600

This means that any time you submit a W-2 Form, you will also need to submit a W-3 Form. You will need to submit the W-2 and W-3 Forms to the Social Security Administration (SSA).

What to do if you find an error in W-2 Form?

If you're an employee and you find an error on your W-2 Form, you will need to contact your employer so they can correct the error.

If you're an employer and you find an error on a W-2 Form you have filed, you will need to submit a W-2 C Form, designed to correct errors on a submitted W-2 Form.

What information is on the W-2 Form?

The W-2 Form contains a significant amount of information about both the employer and the employee. Therefore, these documents must be issued privately, as they contain personal information about the employee (e.g., their social security number).

The W-2 Form is an official document that reports an individual's total income within that year and how much of that income was withheld for state and federal taxes.

Continue reading the section below for an exhaustive overview of the information included on a W-2 Form.

How to read a W-2 Form?

Understanding how to read a W-2 Form is essential to know what information needs to be included. Below is a list of the information that needs to be included in each box on a W-2 Form.

Boxes A-F

Boxes A through F contain employee and employer information, including names, tax identification numbers (TIN), and addresses.

Box A: Box A contains the employee's nine-digit social security number (SSN).

Box B: Box B contains the employer's nine-digit employer identification number (EIN).

Box C: Box C contains the employer's business name and address, including the zip code.

Box D: Box D may contain a control number to differentiate various W-2 forms; filling out this box is optional.

Box E and F: Boxes E and F are combined into a single container that has the employee's full name and home address, including the zip code.

Boxes 1 and 2

Box 1: Box 1 contains the employee's total annual compensation. This includes their pay, tips, bonuses, etc.

Box 2: Box 2 contains the total amount of money withheld from the employee's pay for federal income tax.

Boxes 3-6

Box 3: Box 3 contains the total amount of the employee's salary that is eligible for social security withholdings.

Box 4: Box 4 contains the total amount of money withheld from the employee's pay for social security taxes.

Box 5: Box 5 contains the total amount of the employee's salary that is eligible for Medicare withholdings.

Box 6: Box 6 contains the total amount of money withheld from the employee's pay for Medicare taxes.

Boxes 7 and 8

Box 7: Box 7 contains the total amount of tips the employee made.

Box 8: Box 8 contains the total amount of tips allocated from the employer to the employee.

Boxes 9-14

Box 9: This box should be left empty.

Box 10: Box 10 contains the dependent benefits the employee is claiming, if relevant.

Box 11: Box 11 contains the amount of money distributed to an employee from the employer's nonqualified plan.

Box 12: Box 12 contains different codes (e.g., 12a, 12aa, 12b, etc.) that report different things.

Box 13: This box should be left empty.

Box 14: This box can be used for the employer to communicate any additional information regarding the employee's compensation or withholdings or may be left empty.

Boxes 15-20

Box 15: Box 15 contains the employer's state and tax identification number.

Box 16, box 17, box 18, and box 19: Boxes 16 through 19 contain information on the employee wages eligible for state and local income tax and the amount of income tax that was withheld.

Box 20: Box 20 contains the city or state where the local income tax was withheld, reported in box 19.

What is the deadline for W-2 Forms?

The deadline for W-2 Forms is January 31. Therefore, employers must deliver their employee's W-2 forms to their employees and the Social Security Administration by this date.

What is the difference between a W-2 Form and W-4 Form?

W-2 and W-4 forms are both essential documents for employers to use when keeping track of employee payroll to avoid wage law violation lawsuits and other potential risks.

A W-2 Form is a document that reports the total earnings and withholdings an employee has in a tax year. A W-4 Form is a document that employees fill out informing their employer how much money the employer should withhold for federal income taxes.

How Skuad can help you with W-2 forms?

At the end of every fiscal year, employers are required to provide all of their employees with a W-2 Form and send a copy of these forms to the IRS. Managing employee W-2 payroll can be complicated; with Skuad, you can request W-2 Forms at any time, complete these forms, and file them.

Reach out to our team today to learn how we can help you manage all aspects of hiring, onboarding, and paying your globally distributed team on one simple platform.

FAQs

What is an IRS W-2 Form?

A W-2 Form is a tax document submitted to the Internal Revenue Service (IRS) annually that reports the following employee information:

The total amount of money the employee made that year (including tips)
The amount of taxes that were withheld from the employee's annual pay, including:

Federal income taxes
State income taxes (where the employee is located)
Social security taxes
Medicare taxes

How much the employee contributed to their 401(k) retirement plan, if relevant
How much the employee contributed to their health savings account (HSA), if relevant
Any other information relevant to the employee's pay

What is the difference between 1099 and W-2 forms?

Although there are several functional differences between a W-2 Form and a 1099 Form, the primary difference between these two forms is that a W-2 Form is a form employers use to document employee pay and withholdings, while a 1099 Form is a form issued to independent contractors stating how much they were paid for services rendered.

A 1099 Form does not include information about withholding because independent contractors pay these taxes themselves.

How do I get my W-2 Form?

Employees should be given their W-2 Forms by their employer. The deadline for these forms to be delivered is January 31, and employers may choose to deliver them physically or electronically.

What is a W-2 Form used for?

A W-2 Form is used to document and communicate to the IRS how much money an employee made and how much they had withheld for taxes, retirement contributions, and more within a fiscal year.

How much does a W-2 Form cost?

There is no associated cost if you file your W-2 Form(s) electronically.