IRS Form W-2 Wage and Tax Statement

1099 Vs W-2

Occasionally, taxpayers confuse the W2 Form with the Form 1099 series - several documents employers have to prepare to state how much money they paid to individuals and entities they do not treat as their employees. When you are inviting an independent contractor or a freelancer for a specific job, give them a form that belongs to the 1099 series.

The difference between 1099 and W-2 Forms and people you provide with these forms is the degree of control you have over their work (contractors and freelancers may even bring their own agreements to sign with your company) and the length of your cooperation - as a general rule, individuals whose income is described in a W-2 Form are employed for a long time.

How to Read a W-2?

Refer to these IRS Form W-2 Instructions whether you are filling out this form for an employer or your intention is to understand the paperwork upon receiving it from your organization:

1. Identify the employee by their personal and contact details . List the main business details and the contact information of the employer. It is permitted to enter the control number in case you have to differentiate between various W-2 Forms - skip the field if you want.

2. Specify the wages of the employee, the tips they got, and other kinds of compensation you have paid over the twelve months described in the form . State how much income tax was deducted from the wages and indicate the social security wages and tax deducted.

3. List the Medicare taxable wages and the tax you deducted over the year to contribute to the employee's Medicare . Record the tips the employee informed you about as well as tips distributed to the individual - the latter requirement is mandatory for large businesses that serve food and drinks.

4. Clarify how many benefits you paid or incurred for the employee in line with the terms of the program that helps them deal with expenses incurred due to eligible dependents . Show how many distributions were given to the employee from nonqualified plans. Use the official Form W-2 instructions to review the list of codes you may have to indicate in the paperwork - for instance, military employers are required to tell the IRS about combat pay that will not be taxed and write down the Code Q.

5. Provide more information about the employee if the definitions in the form apply to them - you can confirm they are an employee in accordance with the statute, the individual in question contributed to one or several retirement plans, or there is a necessity to elaborate on sick pay payments handled by a third party. Use a blank field to disclose more information about the employee if you believe it is important to share it.

6. Add the abbreviation to identify the state where the company is located, record the identification number assigned to your entity by the state, and explain how much income tax you have to pay both on state and local levels . It is possible to list two states and localities in case you operate in different locations.

7. Once the forms are ready, the employer must mail one copy to the Social Security Administration, keep a copy in their records, and send three copies of the instrument to the employee whose income, benefits, and taxes are outlined in the documentation.

What Happens If You Forgot to File a W-2 on Your Tax Return?

If you forgot to send a copy of the W-2 Form with your income statement, fiscal authorities will not receive full information about your income. Whether the consequence is the underreporting of income or mistakes made during computations of tax, the IRS might impose penalties on you or conduct an audit to examine your tax return more rigorously. To avoid these consequences, ensure you attach a copy of Tax Form W-2 to the income statement; if you submitted the latter instrument without taking the details from Form W-2 into account, file a modified form as soon as you can so that the IRS has correct information about your income and taxes you owe.

Remember that employers are obliged to mail their employees the Wage and Tax Statement Form by January 31. If you did not get a copy or the statement you received contains mistakes the employer refuses to fix, inform tax organs about it - they will contact the employer directly making them send you the error-free version of Form W-2.

When Is Form W-2 Due?

The Form W-2 deadline is January 31 for both electronic and paper versions of the document. You cannot request an automatic extension for this form. You are allowed to apply for one 30-day extension to file the form with the SSA. For this purpose, submit a completed IRS Form 8809, Application for Extension of Time to File Information Returns before the Form W-2 due date. The IRS grants an extension to file the form only in extraordinary circumstances, like a natural disaster, fire, or other similar situations and no additional extension will be allowed.

Even if you were granted an extension to file the form with the SSA, you still need to provide it to your employees before January 31. To request the extension to furnish the form to your employees, send the letter containing your name, address, employer identification number, and the proper explanations to the I nternal Revenue Service, Attn: Extension of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430 .

This extension is usually granted for up to 15 days unless you provide a reasonable cause of need up to 30 days from the due date.

The amount for the Form W-2 late filing penalty is based on the duration of the delay:

• If you file the form within 30 days after the due date, you have to pay $50 per form (max. $556,500 per year, or $194,500 for small businesses);
• If you file more than 30 days after the due date but before August 1, the fine amount is $110 per form (max. $1,669,500 per year, or $556,500 for small businesses);
• If you file after August 1, the penalty is $270 per form (max. $3,339,000 per year, or $1,113,000 for small businesses).

Note, that the amount of penalty is indexed for inflation.

How to File a Corrected W-2 Form?

To correct errors on the form, fill out the IRS Form W-2C, Corrected Wage and Tax Statements. Submit this form as soon as possible after discovering an error. Use Form W-2C to furnish the corrected Form W-2 to the SSA and to your employees.

IRS W-2 Related Forms

• IRS Form W-2AS, American Samoa Wage and Tax Statement. Fill out this document to report American Samoa wages;
• IRS Form W-2GU, Guam Wage and Tax Statement. Complete this version of the form to provide the information about the Guam wages;
• IRS Form W-2VI, U.S. Virgin Islands Wage and Tax Statement. Use this form to provide the required information about the U.S. Virgin Islands salaries;
• IRS Form W-2G, Certain Gambling Winnings. Submit this document to report gambling winnings and taxes withheld on these winnings;
• IRS Form 5754, Statement by Person(s) Receiving Gambling Winnings. The information on this form is used to prepare the Form W-2G if the person receiving the gambling winnings is not an actual winner, or if a group of two or more individuals are sharing the winnings;
• IRS Form W-3, Transmittal of Wage and Tax Statements. Submit his form when filing a paper version of a Copy A of a Form W-2.