The W-2 form, officially known as the Wage and Tax Statement, is an IRS (Internal Revenue Service) tax form practiced in the U.S. to record wages paid to workers and the taxes withheld from them at the end of the year. The Form W-2 states the employee’s yearly wages and the taxes withheld from the employee’s paychecks. A W-2 worker is someone whose company deducts taxes from their paychecks and presents this information to the government.
Requirements for W2 Form
No matter who the employer is, the W-2 form has the same fields. The Form W-2 is divided into federal and state sections as the workers need to file taxes on both levels. In the form, there are fields that present the employer’s details, along with the organization’s EIN (Employer Identification Number) and the organization’s state ID number. The remaining fields on the form mostly focus on the information of the worker’s previous year’s income.
The total earnings of the employee from the organization for the year are included, together with the amount deducted in taxes from the worker’s paychecks, divided in the withholding for Social Security tax, federal income tax, and more. Also, if the employee works for tips, a field in the W-2 form determines the amount of money the employee earned in tips for the year.
When the worker files taxes, the tax withheld in keeping with the W-2 form is subtracted from the tax obligation of the employee. If the amount of tax withheld is more than the employee owes, then they may receive a refund. Also, the IRS uses the W-2 form to track the income and tax liability of the employee. If the income inscribed on the taxes of the employee does not match with the income reported on the W-2 form, the IRS can audit the taxpayer. Nevertheless, the taxpayers are obliged to report the wage, salary, and tip income, even if the amount of income is not inscribed on a W-2.
Tax Related Documents
W-4 Form is a form that people complete for withholding objectives; the organization employs its details to analyze the amount of tax to withhold from the workers’ paychecks. Seven contracted workers need to fill the W-9 form when they begin to work for an organization. If the employees complete the work of $600 worth or more for the organization in a year, the organization announces a 1099 form determining the earnings and deductions done.
Scholars receive a 1098-E record for any year for which they paid interest on a governmental student loan. Also, the scholars receive a 1098-T report detailing the university tuition expenses that might empower students to tax credits or deductions.
Final Words
An organization is legally obligated to send the W-2 form to every worker they pay a salary, wage, or any different form of payment. This does not incorporate self-employed or contracted employees.
To know more about the W-2 Form, attend the Compliance Prime webinar.
