Form W-2 in 2024: Your Most Important Questions Answered

In the complex landscape of US employment regulations, understanding the intricacies of tax-related documentation is crucial for employers looking to hire or transfer employees to the United States. One of the most essential documents that demands special attention from employers who wish to remain compliant is Form W-2.

This comprehensive guide will explore the key aspects of Form W-2, its significance, and associated employer responsibilities.

What is Form W-2?

Form W-2, also known as the Wage and Tax Statement, is a document employers use to report annual wages and the amount of taxes withheld from an employee’s paycheck to the Internal Revenue Service (IRS).

It serves as a comprehensive summary of an employee’s earnings and payroll tax liability information, which is then used to determine each employee and employer’s tax and social security. The IRS may also use this to determine whether further investigation is required for mistakes or undeclared income.

What is a W-2 Employee?

A W-2 employee, also known as a traditional employee, is an individual who works for an employer and receives a regular salary or hourly wage. This typically means full-time and part-time employees who have taxes withheld from their paychecks.

W-2 employees are entitled to various employment benefits, such as health insurance, retirement plans, and other perks provided by the employer.

It’s important to remember that Form W-2 only applies to employees and not to independent contractors. When working with contractors, you are supposed to fill out Form 1099-NEC instead.

What is IRS Form W-2? The 2 Different Documents

There are two main types of IRS Form W-2: Form W-2 Employee Copy and Form W-2 Employer Copy.

The Employee Copy is the version that employees use to file their personal income tax returns, while the employer retains the Employer Copy for their records.

Both forms provide critical information on wages, taxes withheld, and other pertinent details.

What is Form W-2 Used For?

Form W-2 serves multiple purposes, with its primary function being the documentation of an employee’s income and tax obligations.

Employers use Form W-2 to report wages and taxes withheld to the IRS, while employees use it to file their federal and state income tax returns. Other entities, like mortgage lenders or government agencies, may also request a copy of an individual’s W-2 for verification.

Who Needs Form W-2?

Any employer engaged in a trade or business providing cash or non-cash payments to their employees must file Form W-2 for each individual employee. This includes both domestic and foreign employers with employees working in the United States.

International companies need to remember this requirement when considering staffing arrangements within the US, as mistakes here can lead to significant delays in expansion or limits on available operations.

How Do You Know When to File Form W-2?

The tax filing deadline for Form W-2 is January 31st. This is done for the previous tax year (January 1st to December 31st) and should encompass all payments within that time. Employers must provide copies of Form W-2 to their employees and submit the forms to the Social Security Administration (SSA) by this date. This should be done promptly to give employees enough time to file their own individual taxes in April.

Employers should also be mindful of state-specific deadlines, as some states have different filing requirements.

What Happens If You Miss the Due Date to File Form W-2?

Failure to meet the January 31st deadline for filing Form W-2 is a crime that can lead to penalties imposed by the IRS.

Penalties start at $50-60 per late form and can rise as high as $630 per form depending on how late and how many forms there are. To avoid these penalties, employers should strive to meet the deadline and promptly address any errors or omissions on the forms. This may include seeking the help of 3rd party professionals who can expedite the process.

Filling in the W-2: Form W-2 Step-by-Step Guides

Filing Form W-2 Online

Many employers choose to file Form W-2 electronically through the Social Security Administration’s (SSA) Business Services Online (BSO) website. Electronic filing is efficient and helps reduce the risk of errors commonly associated with paper filing.

1. To begin the process, you must first create an account on the SSA’s BSO website.
2. Follow the instructions on the website and enter all required employee information. This will include their Social Security Number (SSN), wages, and tax withholdings.
3. Carefully review the information before submitting the forms electronically, as there won’t be an opportunity to make corrections.

Filing Form W-2 by Mail

Employers who choose to file Form W-2 by mail must follow a lengthier and often more complex process to ensure accuracy and timely submission.

1. Acquire the official Form W-2 from the IRS or an authorized supplier. This will come as a packet with multiple copies, which must all be filled in and handled in different ways.
2. Fill in the required fields accurately according to each employee’s instructions on the forms.
3. Mail the completed W-2 forms to the appropriate address provided by the SSA, along with any other required forms or documents. This will usually entail sending it to the SSA office in Pennsylvania. Ensure sufficient postage and timely delivery in order to avoid missing cutoff dates.

What Does Each Form W-2 Box Mean?

Understanding the information in each box of Form W-2 is crucial for employers and employees. Here is a brief overview of the key boxes:

• Boxes A-F (Employer/Employee Details): Remember, for international employees still waiting for their Social Security Number (SSN), the relevant box should be filled in “APPLIED FOR”.
• Box 1 (Wages, Tips, Other Compensation): This reports the total taxable wages paid to the employee.
• Box 2 (Federal Income Tax Withheld): This is the amount of federal income tax withheld from the employee’s wages.
• Box 3 (Social Security Wages): This indicates the total wages subject to Social Security tax.
• Box 4 (Social Security Tax Withheld): This is the amount of Social Security tax withheld.
• Box 5 (Medicare Wages and Tips): This represents the total wages subject to Medicare tax.
• Box 6 (Medicare Tax Withheld): This shows the amount of Medicare tax withheld.

Boxes 7-14 may not relate to all situations.

• Box 7 (Social Security Tips): Here, you can report any tips given to an employee that are subject to Social Security tax.
• Box 8 (Allocated Tips): Here, you can indicate any tips allocated to the employee by their employer.
• Box 9: Empty
• Box 10 (Dependent Care Benefits): This is for reporting the total amount of dependent care benefits paid or incurred by the employer.
• Box 11 (Nonqualified Plans): This shows distributions from a nonqualified plan, including amounts considered as wages.
• Box 12 (Codes A through DD): This space includes various codes indicating different types of compensation or benefits, such as contributions to retirement plans, health benefits, and other fringe benefits.
• Box 13 (Checkboxes): This contains checkboxes for statutory employee, retirement plan, and third-party sick pay.
• Box 14 (Other): This provides space for employers to report additional information, such as state disability insurance taxes withheld or union dues.
• Boxes 15-20 (State and Local Taxes): These will depend on the specific requirements of your state or local authorities but generally deal with additional local taxes.

Please note that some boxes which do not relate to your employee should remain empty. This includes box 9, which no longer applies to the process.

How INS Global Can Help Ensure Compliant Employment for International Companies in the US

Form W-2 plays a key role in the relationship between employer and employee in the US, and employers must prioritize understanding its nuances to fulfill their responsibilities accurately. By staying informed with the help and support of experienced global employment partners, employers can confidently and easily navigate the complexities of international employment.

Navigating the complexities of US employment regulations, especially concerning tax-related documentation like Form W-2, can be challenging, and mistakes quickly become costly. That’s why INS Global specializes in employment solutions for companies who need comprehensive services that reduce the risks of compliance errors while boosting HR efficiency.

For nearly 20 years, we’ve provided Employer of Record (EOR) services, Professional Employer Organization (PEO) support, recruitment outsourcing, legal consulting, and expert payroll and benefits management to companies in the US and more than 160 other countries worldwide. By partnering with INS Global, employers everywhere can focus on their core business activities while ensuring seamless and compliant employment.

So, talk to our teams of experienced and qualified expert global expansion advisors today to learn more about ensuring streamlined and compliant employment in the US.