Form W-2

Form W-2, the Wage and Tax Statement, is the IRS document employers must give each employee every year. It reports the employee’s total annual wages and the amounts withheld for federal income tax, state tax, Social Security, and Medicare. Workers use it to file their tax returns, and the IRS uses it to verify what was earned and paid.

What Is Form W-2?

A W-2 is the year-end summary of an employee’s pay and tax withholding. Every employer that paid a worker at least $600, or withheld any tax, must issue one. The form pulls together a full year of paychecks into a single statement, which is why the totals on it should match the running figures on an employee’s pay stubs. Employees attach or reference the W-2 when they file their annual return.

How Form W-2 Works

The form is organized into numbered and lettered boxes:

• Box 1 shows taxable wages for federal income tax.
• Boxes 2, 4, and 6 show federal income tax, Social Security tax, and Medicare tax withheld.
• Boxes 3 and 5 show the wages those FICA taxes were calculated on.
• Boxes 15 to 20 cover state and local wages and taxes.

Employers send copies to the employee, the Social Security Administration, and state agencies. They also file a Form W-3, a transmittal summary, alongside the batch of W-2s.

Example

Over the year, Nina earned $65,000. Her employer withheld $7,200 in federal income tax, $4,030 in Social Security tax, and $942.50 in Medicare tax. In January, the employer issues Nina a W-2 with Box 1 showing $65,000 and the withholding boxes showing those amounts. Nina uses the form to file her return, comparing what was withheld against what she actually owes to find out if she gets a refund or has a balance due.

Form W-2 vs. Form W-4

These two are often mixed up. A W-4 is what an employee fills out when they start a job to tell the employer how much tax to withhold. A W-2 is what the employer hands back at year-end to report what was actually earned and withheld. In short, the W-4 sets withholding up front, and the W-2 reports the results after the fact.

Key Takeaways

• Form W-2 reports annual wages and taxes withheld for each employee.
• Employers must issue it by January 31 for the prior year.
• Boxes break out federal, state, Social Security, and Medicare amounts.
• Employees use the W-2 to file their tax returns.
• A W-2 covers employees; a 1099 covers independent contractors.

Frequently Asked Questions

What is a W-2 used for?

Employees use Form W-2 to file their annual income tax return. It reports total wages earned and the federal, state, Social Security, and Medicare taxes withheld during the year.

When is the W-2 deadline?

Employers must send W-2s to employees and file with the Social Security Administration by January 31 for the prior tax year.

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

A W-2 reports wages for employees with taxes withheld. A 1099 reports payments to independent contractors, who handle their own taxes.