Form W-2

Definition

Form W-2 is a tax form used in the United States to report wages paid to employees and the taxes withheld from those wages. 

What is a Form W-2?

The primary purpose of Form W-2 is to report an employee’s annual earnings from wages, salaries, tips, bonuses, and other compensation received from their employer during the tax year.

Employers are required to provide a Form W-2 to each of their employees who received wages of $600 or more during the tax year, regardless of whether taxes were withheld. This includes full-time, part-time, and temporary employees, as well as seasonal workers and independent contractors who are treated as employees for tax purposes.

Employers are required to provide employees with their Form W-2 by January 31 following the end of the tax year. Additionally, employers must file copies of all Forms W-2 with the Social Security Administration (SSA) by the last day of February if filing by paper or by the last day of March if filing electronically.

The information reported on Form W-2 helps employees calculate their federal and state income tax liabilities, determine whether they are eligible for tax credits or deductions, and reconcile their tax withholdings with their actual tax liability.

If employers fail to provide employees with Form W-2 by the deadline or who provide incorrect or incomplete information may be subject to penalties imposed by the IRS. 

Example of a Form W-2

Employee: John Smith

Employer: ABC Company

Tax year: 2023

• Box 1: Wages, tips, and other compensation: $50,000.00
• Box 2: Federal income tax withheld: $6,500.00
• Box 3: Social Security wages: $50,000.00
• Box 4: Social Security tax withheld: $3,100.00
• Box 5: Medicare wages and tips: $50,000.00
• Box 6: Medicare tax withheld: $725.00
• Box 12: Codes for various benefits (401(k) contributions): $2,000.00

In this example, John Smith received a Form W-2 from his employer, ABC Company, for the tax year 2023. The form details his annual earnings of $50,000.00 and the taxes withheld from his wages. Additionally, it reports his contributions to a 401(k) retirement plan and John will use this information to complete his individual tax return for the year.