If you have ever filed a tax return, then you’ve probably come across the term W-2.
This is an essential tax document that provides an overview of your income and the taxes withheld from your salary every year. You are going to need it to file state and federal returns, so here’s everything you need to know about a w2 form.
Table of Contents
Automatic Deductions
Your employer is required, by law, to withhold a portion of your salary to cover mandatory taxes.
Just like you must file taxes, so does your boss – and part of their filing process is a breakdown of how much tax they have deducted from you based on what you earn. They will submit this information on the W-2.
The document also shows how much of that amount withheld goes to federal and state tax, and any other qualifying tax payments made.
This is a vital document when you file your tax return, and the IRS says employers must provide a copy of your W-2 no later than January 31.
Exempt Professions
If you’re not listed as a company employee, then you shouldn’t be filing a W-2.
Freelancers, independent contractors, and other professional titles are exempt from submitting a W-2 and will be required to submit a Form 1099 instead.
Document Structure
The W-2 is divided into various checkboxes that break down specific tax amounts that have been withheld from your paycheck.
The boxes will show your annual income, as well as your monthly salary. The amount of federal tax withdrawn is shown in Box 2.
Remember that a percentage of your salary goes straight to Social Security tax, so the figures listed might seem a little lower than you would expect. Box 3 totals your annual income, minus Social Security tax.
The rest of the boxes represent the amounts deducted for Medicare tax and other taxes that might apply to you.
A Warning on Withheld Tax
Your employee takes a certain portion of your salary for tax and pays it to the IRS throughout the year, meaning you don’t have to go through the trouble of making these payments yourself.
But that doesn’t mean that those monthly payments shouldn’t appear on your return.
The tax withheld and declared on the W-2 must be subtracted from your tax bill. This is a simple rule that should show you whether you will receive a refund, or are expected to make an additional payment.
Note that this rule also applies to those filing state income tax returns.
Confirm Your Details
Your social security details are used to identify and track your return as it makes its way through the IRS processing chain.
If there are discrepancies between your social security number on a personal return and documents submitted by an employer, the IRS will want to investigate your return, which holds up the entire process.
If there’s an error on your W-2, tell your employer straight away to avoid delays.
The All-Important Attachment
Always remember to attach the W-2 to your return, whether filing online or manually. Online tax filing programs can automatically import your w2 and send all the right documents when you submit your tax return, others don’t, so make sure.
Additional questions
If you have any additional questions about the W-2 Form, visit the IRS website or contact a tax professional who can support you with the information you may need.
