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Form W2 is a multi-part standard tax form that an employer must send to the employees as well as Internal Revenue Service (IRS) at year end. The form contains employee’s annual wages, Social Security earnings, Medicare earnings, and federal and state taxes withheld from the employee’s paycheck.
Employers should also submit W-3 forms to SSA along with W-2 forms summarizing all the information provided in the W-2 forms of all employees. Both the forms should have same and accurate information regarding total earnings, Social Security wages, Medicare wages and withholding for all employees for the previous year.
As an employer, you should prepare 6 copies of each W2 form per employee. All the six copies should be prepared and are equally important. The following table shows the exact departments, where the W-2 form should be send:
|Copy A (Red Colored Form)||––||Social Security Administration|
|Copy 1||––||City, state or locality|
|Copy B||––||Filing the employee’s federal tax return|
|Copy C||––||Employee’s records|
|Copy 2||––||City, state, or locality|
|Copy D||––||Employer’s records|
Employers should prepare W-2 forms and send them to their employees. Ensure you keep the Copy A i.e. red colored form.
Deadline Dates To File W-2s
|Jan 31, 2017||Deadline to distribute Forms W-2 to employee|
|Feb 28, 2017||Deadline to file using paper Forms W-2|
|Mar 31, 2017||Deadline to file using Business Services Online|
How to Submit W-2 Forms?
- Employers should prepare W-2 forms and send them to their employees. Ensure you keep the Copy A i.e. red colored form.
- Submit W-2 and W-3 form to Social Security Administration (SSA).
- Make sure you include all the copies of W-2 forms along with the W-3 form.
- Send all the forms to the following SSA address:
|U. S. Postal Service
Social Security Administration
|Private Delivery Service (FedEx, UPS, etc.)
Social Security Administration
* For Certified Mail, use ZIP code 18769-0002
- You can even e-file W-2 and W-3 forms online, directly to the Social Security Administration using CheckMark software. However, while e-filing W-2 forms, you may not need to submit W-3 forms because SSA automatically calculates the total from the submitted W-2 forms.
Before filing the forms, ensure all the company and employee information i.e. TINs, names, and money amounts are same and exact on both the forms. The total no. of W-2 forms should be precisely included in the W-3 forms. You have to submit the original red colored form to the SSA otherwise, they won’t accept photocopies.
SSA Penalties for Late Submission
In case if you are late in submitting Form W-2, then you will be subjected to late filing penalties. Generally, the penalty is based upon the time delayed in filing and size of your business as well. However, if you intentionally delayed the filing, then the minimum penalty of $100 per form will be imposed. In case if you correctly filed the returns within the 30 days of due date, then the lowest penalty amount is $15.
How to Correct an Error on Your W-2
If you make an error in the forms, then the period of one month before filing to SSA will be helpful for you to correct and rectify the mistake. If you have noticed the error after the submission to SSA, then you have to resubmit the corrected forms before the due date.
Common Errors in Completing Form W-2
Always review and cross-check all the information on W-2 and W-3 Forms before submitting to the Social Security Administration so that you didn’t have to waste your precious time unnecessarily. However, the following are the common W-2 and W-3 form errors.
- Missing the SSA deadlines
- Submitting the form of the wrong year
- Using unapproved forms (Always use IRS-approved forms)
- Submitting W-2 forms without including W-3 Forms
- Submitting only W-3 Forms to SSA
- Dissimilar information on W-2 and W-3 Forms
The Following is a Sample of Filled W-2 Form:
Understanding Various Boxes found on Form W-2
W-2 Tax Form – First Set
Box A: Employee’s Social Security Number: Fill the employee’s SSN number correctly in this box. If there is any error in the SSN number, then the employee should immediately report the mistake to the concerned department i.e. HR or tax or payroll department. They will correct and issue a new Form W-2 to the employee. If the employee failed to rectify the mistake, then the error will definitely slow the processing of their return.
Box B: Employer Identification Number (EIN): This box is for entering employer’s unique tax identification number.
Box C: Employer’s Information: The box is to fill the employer’s name, address, city, state, and zip code. The address should be of company’s headquarters or actual workplace rather than the employer’s local or personal address.
Box D: Control Number: A control number is an internal number or code developed by the employer or company’s payroll department, which identifies this unique Form W2 document in their records. If the company didn’t assign any box number to the employee, then the box (d) should be left blank.
Box E: Employee’s Name: This box should be filled with employee’s complete name i.e. first name, middle initial and last name. Additionally, it is important to note that the name should be same as mentioned in the employee’s Social Security card. If there is a mistake in the form, then the employee should report the matter to the concerned department so that they re-issue a new Form W-2 with the correct name. The employee should also provide photocopy of his or her Social Security card to the respective department so that they can update their records with the new name.
Box F: Employee’s Address: This box identifies the address, city, state, and zip code of the employee. Ensure it is correct and accurate because the employee’s refund might be posted to a different address. In case the address is incorrect, then the employee should immediately notify the HR department so that they can update their records with the employee’s new address.
W-2 Tax Form – Second Set
Box 1 – Wages, Tips, and Other Compensation: This box identifies total taxable wages or salary for the federal income tax purposes, which includes wages, salary, tips, bonuses, prizes, commissions, severance or dismissal pay, vacation pay and fringe benefits. The employee should not include any payroll deductions or pre-tax benefits such as savings contributions to a 401(k) plan, 403(b) plan, medical or dependent care reimbursement plan, dental and health insurance.
Box 2 – Federal Income Tax Withheld: This box identifies the total amount of federal income tax withheld from the employee’s pay based on their W-4 filings. If they do not file the W-4 yet, then the default will be “single and 0” regardless of their marital status.
Box 3 – Social Security Wages: SSW is the total amount of wages subject to the Social Security tax. The Social Security tax in 2016 is assessed on wages up to $118,500, which is called Social Security wage base. If the amount is above the wage base, then the employees need to report to their employer to correct the W-2 forms.
Box 4 – Social Security Tax Withheld: This box shows the total amount of Social Security taxes withheld from employee’s pay. The Social Security tax is a flat tax rate of 6.2% on employee’s wage income, up to a maximum wage base of $118,500 (for 2016). The maximum yearly Society Security tax withholding amount in 2016 is $7,347.
Box 5 – Medicare Wages and Tips: This box shows the total amount of wages and tips, which are subjected to the Medicare taxes. Medicare wages includes any deferred compensation, 401(k) contributions, or other fringe benefits that are excluded from the federal income tax. Remember, there is no maximum wage base for Medicare taxes.
Box 6 – Medicare Tax Withheld: This box shows the amount of taxes withheld from employee’s pay for the Medicare tax, which is nothing but the flat tax rate of 1.45% on your total Medicare wage under $200,000. The Medicare wage percentile for self-employed is 2.9%. However, due to Obamacare policy, employees are subjected to withhold Additional Medicare Tax at a rate of 0.9%.
Box 7 – Social Security Tips: This box shows the total amount of tips an employee has reported to the employer and subjected to social security tax.
Box 8 – Allocated Tips: Allocated tips are defined as the tips allocated by none other than the employer. This is not included in boxes 1,3,5, or 7.
Box 9 – Advance EIC Payments: This box is no being longer used because the reporting requirement’s i.e. advance of the earned income credit expired a few years. For some reason, it is not yet removed from the form but it is shaded so that the employees don’t get confused.
Box 10 – Dependent Care Benefits: This box reports the amount, which is reimbursed for dependent care expenses through a flexible spending account or the dollar value of dependent care services provided by the employer. If the amount is under $5,000, then it is considered as non-taxable benefits. However, if the amount reported is well over $5,000, then it is considered and reported as taxable wages in Boxes 1, 3, and 5.
Box 11 – Nonqualified Plans: This box reports either of the two amounts i.e.
- Amount distributed to the employee from employer’s non-qualified deferred compensation plan
- Amount distributed to the employee from employer’s non-government Section 457 pension plan
However, this amount is already included as taxable wages in Box 1.
Box 12 – Deferred Compensation and Other Compensation: In this box, several types of compensation and benefits are reported. The box reports a single letter or double letter code followed by a dollar amount. The following table helps you understand the codes easily, as the definitions are directly fetched from IRS website:
|Code AA||Designated Roth contributions under a section 401(k) plan|
|Code A||Uncollected social security or RRTA tax on tips|
|Code BB||Designated Roth contributions under a section 403(b) plan|
|Code B||Uncollected Medicare tax on tips|
|Code C||Taxable cost of group-term life insurance over $50,000|
|Code DD||Cost of employer-sponsored health coverage|
|Code D||Elective deferrals under section 401(k) cash or deferred arrangement (plan)|
|Code EE||Designated Roth contributions under a governmental section 457(b) plan|
|Code E||Elective deferrals under a section 403(b) salary reduction agreement|
|Code F||Elective deferrals under a section 408(k)(6) salary reduction SEP|
|Code G||Elective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental section 457(b) deferred compensation plan|
|Code H||Elective deferrals under section 501(c)(18)(D) tax-exempt organization plan|
|Code J||Nontaxable sick pay|
|Code K||20% excise tax on excess golden parachute payments|
|Code L||Substantiated employee business expense reimbursements|
|Code M||Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (for former employees)|
|Code N||Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (for former employees)|
|Code P||Excludable moving expense reimbursements paid directly to employee|
|Code Q||Nontaxable combat pay|
|Code R||Employer contributions to an Archer MSA|
|Code S||Employee salary reduction contributions under a section 408(p) SIMPLE plan|
|Code T||Adoption benefits|
|Code V||Income from the exercise of nonstatutory stock option(s)|
|Code W||Employer contributions to a health savings account (HSA)|
|Code Y||Deferrals under a section 409A nonqualified deferred compensation plan|
|Code Z||Income under section 409A on a nonqualified deferred compensation plan|
Box 13 – Check the Box: The three check boxes should be checked by the employer if the employee:
- is a statutory employee
- have participated in some retirement plan
- have received the third party sick pay
Box 14 – Other Tax Information: The employer needs to report any information that didn’t fit anywhere else in the form such as state disability insurance taxes withheld, union dues, after-tax contributions to a retirement plan, employer-paid tuition assistance, health insurance premiums deducted and nontaxable income.
Form W2 – Third Set
Box 15: State and State Employer’s Identification: This box is pretty straightforward, as it reports the employer’s state and state tax identification number. In case if the employee works in a state without a reporting requirement, then the employee should leave it blank along with other boxes i.e. box 16 and box 17. In addition, if the employee has several withholdings in a number of states, then the employee should fill more than one box provided in the box 25.
Box 16: State Wages: This box represents the total amount of employee’s taxable wages i.e. wages, tips, and compensation earned in that state. If the employee is subjected to the state income taxes, then the box 16 will represent the total amount of taxable wages for state tax purposes. If the employee lives and works in a state that doesn’t impose an income tax, then the employee should leave this box blank.
Box 17: State Income Tax Withheld: The box reports the total amount of state income taxes withheld from the employee’s paychecks for the wages reported in Box 16.
Box 18: Local wages: If the employee is subjected to local, city, or other state income taxes, then the total amount of taxes withheld from the employee’s paycheck for local income taxes should be reported in this box.
Box 19: Local income tax withheld: If the employee has reported wages regarding local income tax in the box 18, then the employee should report the withholding in the box 19.
Box 20: Locality name: The box 20 represents the name of the particular local, city, or other state tax being reported at box 19.
We hope the following guide solved your concerns related to form W2. If you have any further question, please feel free to comment below.