What is W-2 Form?
W-2 forms are a critical part of the tax preparation process for many people. They report taxes withheld and wages paid by an employer over a year. They have an advantage over many tax-related forms because you do not have to fill out a W-2 form. You just get it and use it.
The foremost point you should know is that you are not the only person for whom your employer is preparing a W-2. Yourself, the Social Security Administration, and the IRS should usually obtain a copy of the W-2 form from your employer. It is done for making it unwise to talk about under-reporting your income or unpaid excess taxes. Also, if you are a staff member and you earned $600 or more or had any amount withheld, you can expect a W-2 form. If you make money as an independent contractor, your boss should request a 1099 form as long as you earned more than $600; instead of a W-2.
Important details of the W-2 form:
The type of W-2 forms are less, but it contains many important details. The important things that include are:
- Your mailing address and your name.
- Your Social Security number
- An Individual Identification Number for the company.
- Your gross taxable income or bonuses received over the year while doing the job.
- The amount of Federal Tax that was cut over the year.
- The amount of State Tax that was withheld and/or local tax.
- The taxes which were withheld on Medicare and Social Security.
Usually, you will receive multiple copies of your W-2 form when you receive it. Your employer needs to send it to you by January 31st. This allows you to retain a copy of your Federal Tax Return and your state, city, or local tax return.
Always have a look at your form to ensure that all details are correct. If your Social Security number is wrong or your name is misspelled or incomplete, the IRS would find it challenging to align its records of what you received and paid with what you say. There are some other boxes on the W-2 form that contain details that you, or your tax preparer will need to refer to when you fill out your tax return.
Why is the W-2 critical?
You may be aware that self-employed people usually have to make estimated tax payments during the year. Therefore, you can believe that you do not have to pay your taxes until April 15, unlike them.
Moreover, that’s not the case. When you file your taxes, the W-2 summarizes how many incomes, social security, and Medicare have been withheld. You need to subtract how much you have already paid to the IRS when calculating your total tax due for the entire year.
The IRS allows employers on Form W-2 to disclose employee wage and salary details. Your W-2 form also states the amount of state, federal, and other taxes your paycheck withheld.