What is a W-2 employee? 

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    Hanna Horvath

    Page written by Hanna Horvath. Last reviewed on March 11, 2024. Next review due October 1, 2025.

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      Your business is expanding, and you’re starting to hire extra help. But what type of employee is best for your company? Understanding your employees and their taxes can save you headaches down the road.

      A W-2 employee is one of the most common employee classifications. Unlike a freelancer or contractor, a W-2 employee has a more defined role at your company and receives a regular wage. Understanding how taxes work with W-2 employees can ensure your business runs smoothly.

      What is a W-2 employee?

      A W-2 employee is someone who works for your company and receives a regular paycheck. These employees are typically considered part-time or full-time workers, and you, as the employer, are responsible for withholding taxes from their wages. This includes federal income tax, Social Security tax, and Medicare tax.

      Employers are also responsible for reporting the employee’s wages and tax withholdings to the IRS using Form W-2.

      W-2 employees are entitled to certain benefits and protections under state and federal laws. These can include minimum wage requirements, overtime pay, workers’ compensation, and unemployment insurance.

      What is a W-2 form?

      The W-2 form, also known as the Wage and Tax Statement, is like a report card for your employee’s earnings and tax withholdings throughout the year. As an employer, you’ll need to fill out a W-2 form for each of your employees and send copies to both the employee and the IRS.

      Here’s a rundown on what you’ll find on a W-2 form: 

      • Your employee’s information (name, address, and Social Security number)
      • Your company’s information (name, address, and Employer Identification Number)
      • Total wages, tips, and other compensation you paid to your employee
      • The amount of taxes you withheld from their paychecks (federal, state, and local income taxes, Social Security, Medicare)
      • Any other relevant information, like retirement plan contributions and dependent care benefits

      Basically, the W-2 form is a snapshot of your employee’s earnings and tax withholdings for the year. It’s essential for both you and your employee to have accurate W-2 forms when tax season rolls around.

      How can I get a W-2 form? 

      You can get W-2 forms directly from the IRS website or through other online vendors that specialize in tax forms. 

      If you use payroll software to manage your employee’s wages, chances are the software already has built-in W-2 form preparation and filing capabilities. That means less work for you come tax time. 

      To fill out the W-2 forms correctly, you’ll need to keep accurate records of your employee’s wages, tax withholdings, and other relevant information throughout the year. Staying organized will make your life a whole lot easier. 

      When is the W-2 deadline?

      As an employer, you’ll need to provide your employees with their W-2 forms by January 31 of the following tax year. So, for the 2023 tax year, you’d need to get those W-2s out to your employees by January 31, 2024.

      In addition to giving your employees their W-2s, you’ll also need to send copies to the Social Security Administration (SSA) by the same deadline. 

      If you miss the W-2 deadline, you could face some pretty hefty penalties from the IRS. We’re talking $50 to $280 per W-2 form, depending on how late you submit them. To avoid any unnecessary fines (and headaches), make sure you prioritize getting those W-2s done well before the January 31 deadline.

      What are W-2 employee benefits?

      Offering competitive benefits can help you attract and retain top talent for your business. Here are some common benefits you might consider offering your W-2 employees:

      1. Health insurance: Offering health insurance plans (medical, dental, and vision) can show your employees that you care about their well-being and help you stand out as an employer.
      2. Retirement plans: Setting up retirement plans, like 401(k)s or pension plans, can help your employees save for their future. Many employers also choose to match a portion of their employee’s contributions, which can be a powerful incentive for your team to save for retirement. 
      3. Paid time off: Everyone needs a break now and then. Offering paid vacation days, sick leave, and personal days can help prevent burnout and promote a healthy work-life balance for your team.
      4. Life and disability insurance: Offering life and disability insurance can give your employees peace of mind, knowing they have financial protection in case of an unexpected illness, injury, or death.
      5. Employee assistance programs: Employee assistance programs (EAPs) offer confidential support for personal and work-related challenges, like mental health concerns or legal difficulties. Showing your employees that you’ve got their back — both in and out of the office — can go a long way.

      What if I have W-2s from multiple employers?

      It’s not uncommon for employees to have multiple W-2 forms if they worked for more than one employer during the tax year. In this situation, you should receive a separate W-2 form from each employer, detailing wages and tax withholdings for the respective company.

      When filing your personal income tax return, you’ll need to report the information from all of your W-2 forms. This involves adding up your total wages, tips, and other compensation from each W-2 and reporting the combined amount on your tax return. 

      Similarly, you’ll need to sum up the federal, state, and local income taxes withheld from each W-2 and enter the totals on your return.

      What if I have multiple W-2s from the same employer?

      In some cases, you may receive multiple W-2 forms from the same employer within a single tax year. This can happen if:

      • You worked for the employer in multiple states, requiring separate W-2 forms for each state’s tax withholdings.
      • You held different positions within the company that were classified under separate payroll systems.
      • You received different types of compensation, such as regular wages and tips, which are reported on separate W-2 forms.

      When you have multiple W-2s from the same employer, you’ll need to report the information from each form on your personal income tax return, just as you would with W-2s from multiple employers. Add the wages and tax withholdings from each W-2 and enter the totals in the appropriate fields on your return.

      How Swoop can help 

      Understanding W-2 employees and the associated tax forms is essential for any business owner. By familiarizing yourself with the purpose of W-2 forms, the benefits W-2 employees are entitled to, and the deadlines, you can ensure tax compliance and better manage your workforce.
      If you’re looking for support in managing your business finances and exploring funding options, consider registering with Swoop. Our platform can help connect you with potential lenders and guide you through every step of the funding process.

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      Written by

      Hanna Horvath

      Hanna Horvath is a CERTIFIED FINANCIAL PLANNER™, copywriter, and journalist. As a content marketer and agency founder, Hanna partners with fintech brands across the industry to establish their content messaging and drive audience engagement. She also writes and edits articles on personal finance — her work has appeared in Bankrate, Business Insider, USA Today, NBC News, Inc Magazine, and more. Hanna currently lives in Brooklyn, New York.

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