Mastering Form W-2: The Essential Guide

The use of Form W-2, Wage and Tax Statement, was introduced in 1943. The first Forms W-2 were sent to employees in 1944. Over time, the form has grown to the complex form we have today.

What is Form W-2, Wage and Tax Statement?

Form W-2 is used to collect wage and salary information to be reported on the federal and state levels. The information on this form helps employees to report income when completing Form 1040 on their personal tax returns.

Every employer should complete a Form W-2 for each employee that has worked for them during the year. This form should be filed with the Social Security Administration, any applicable state tax departments, and sent to the employees.

In the bottom rows of the form, you can find state information. For example, if state tax is taken out automatically, this is where the amount can be found. Look for your State W-2 Reporting Requirements to make sure an income tax was only taken out where applicable – you can never be too safe about money coming out of your income.

Of course, that was a bite-sized breakdown of the different boxes in this form. In total, this form contains 20 boxes of reportable information.

IRS Form W-2 Copy A
Image of Form W-2 Copy A

What information is reported on Form W-2?

Form W-2 is broken up into 4 main sections: employer information, employee information, wage information, and withholding information. The boxes on Form W-2 are as follows:

  • a. Employee’s social security number
  • b. Employer identification number (EIN)
  • c. Employer’s name, address, and ZIP code
  • d. Control number
  • e. Employee’s first name and initial, last name, and suffix
  • f. Employee’s address and ZIP code
  • 1. Wages, tips, other compensations,
  • 2. Federal income tax withheld
  • 3. Social security wages
  • 4. Social security tax withheld
  • 5. Medicare wages and tips
  • 6. Medicare tax withheld
  • 7. Social security tips
  • 8. Allocated tips
  • 9. Reserved
  • 10. Dependent care benefits
  • 11. Nonqualified plans
  • 12a, 12b, 12c, 12d –
  • 13 – Check boxes for: Statutory employee, retirement plan, and third-party sick pay.
  • 14. Other
  • 15-17 – State withholding information
  • 18-20 – Locality withholding information.

Interpreting W-2 instructions box 12

IRS Form W-2 Box 12
IRS Form W-2 Box 12

One of the first things to notice about box 12 is that it is split into 4 horizontal subsections.  These are labeled 12a, 12b, 12c, and 12d. It’s important to note that the letters are lowercase; this is because uppercase letters are reserved for the codes that are entered into these boxes.

The left side of these sections are where the box 12 codes are input. These codes each correspond to a type of income, such as code J, nontaxable sick pay. There are 29 different codes that can be used in box 12. Any items that are listed in the IRS Box 12 Codes, A-HH, can be entered in box 12. It does not matter which box a code is entered in, but you should use box 12a first, then box 12b, and so on.

You should NOT enter more than four items in box 12. If you need to report more than four items, then you can use an additional Form W-2 – copy A to report the remainder, but do not enter more than four items on any one Form W-2.

Do not use box 12 to report any section 414(h)(2) contributions (relating to certain state or local government plans). This should be entered in box 14, along with any other information that you wish to give to your employees.

Who needs to file Forms W-2 with the IRS / SSA?

All employers must report wage and salary information for all of their employees during the previous year. An employee is defined by the IRS as a worker who is employed by the company and whose work is controlled and directed by the company.

Who needs to file Forms W-2 with the state?

Along with the federal reporting requirements, employers need to be aware of their state reporting requirements.

Almost all states have Form W-2 reporting requirements, but each state has their own set of rules. Some states require an additional reconciliation form, which is similar to a state version of the federal Form W-3 transmittal and summary form.

If a state has a state income tax, then they typically require Form W-2 filing. Be sure to check out our State W-2 Reporting Requirements series to ensure that you’re meeting all of your state requirements.

Who receives Form W-2?

The IRS states that a form must be filed for each employee for whom the following applies:

  • You withheld any income, social security, or Medicare tax wages, regardless of the amount of wages.
  • You should have had to withhold income tax if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4.
  • You paid $600 or more in wages, even if you did not withhold any income, social security, or Medicare tax.

There are very limited exceptions for filing a Form W-2, including if you were not required to withhold any income, social security, or Medicare tax and if you paid the employee less than $600 in wages.

Does an independent contractor get a W-2?

The short answer is no, an independent contractor shouldn’t expect to receive a Form W-2. Instead, they should receive a 1099. A 1099 has a completely separate set of rules that do not apply to the answers found here.

The IRS has a breakdown article covering 3 important questions to determine each recipient’s employment category: Independent Contractor or Employee?

What are the deadlines for Form W-2?

Employers are required to file and furnish Form W-2 by January 31st.

Since an employer only needs to postmark their Forms W-2 by January 31st, employees can expect to receive their forms anywhere from January 1st to about 5 business days after the deadline.

If the deadline falls on a weekend or holiday, then it’s typically postponed to the following business day. Employers should always verify the deadline dates at the beginning of the tax year.

Is there a W-2 extension?

Yes, there is. Employers may request a one-time 30-day extension on their Form W-2 filing. Although, there are several caveats for requesting a Form W-2 extension compared to requesting it for other IRS forms.

An employer can apply for an extension for other form types electronically, which is typically granted automatically and immediately. If an employer would like to request an extension for their Form W-2 filing, they must request it via mail using IRS Form 8809. Line 7 must be filled out completely when requesting an extension.

Since an extension cannot be requested electronically, it will not be automatic nor immediate.

Businesses should mail their completed Form 8809 to the following address:

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0209

Is there a penalty for not filing W-2?

Yes, the business can be fined for a failure to submit to the SSA.

While the information return penalties amount for filings submitted before August 1st has not increased in many years, the IRS has continued to increase the penalty amount on filings filed after August 1st. At a glance, this amount may seem extremely low, but that is the amount per employee. The fine has climbed to over $1,000 for a filing with only employees. For larger businesses, this fine can quickly multiply into the thousands. The graphic below shows how quickly the fine can grow based on only 10 forms.

IRS Failure to File Graph
IRS Failure to File Fine Amount

Can I submit a paper filing?

Employers may choose to paper file their Form W-2 filing if their total form count is less than the 250-form threshold. E-filing is encouraged by the IRS, but if you have less than 250 forms to file, then paper filing is an option!

It’s important to note that paper filing is much slower than e-Filing, so it will take longer to receive results, errors, and make corrections.

How is the mailable 250-form threshold calculated?

The 250-form threshold applies to each form type separately. For example, a business filing 200 Forms 1099-MISC and 200 Forms W-2 will still fall under the 250-form threshold because each type is counted independently. However, if one type of form is above the 250-form threshold, then that type must be filed electronically.

It’s worth noting that no form type shares the same cumulative form counts – even original forms and corrections are counted separately. For example, a business that reported 500 Forms 1099-MISC is required to e-File because the form count is over 250. The IRS may return 50 forms that need a correction. In this case, the business may choose to file these 50 corrections via mail, because these 50 forms now fall under the 250-form threshold.

Although, it’s important to note that the IRS generally recommends filing the corrections using the same medium as the original forms. If you e-filed the original forms, then you should e-file the corrections and vice versa if the original forms were paper filed.

IRS Mail in Threshold
How to calculate IRS mail in threshold

What are the requirements for paper filing?

The following is a short list of requirements for filing via mail:

  • Handwritten forms are accepted, but must be legible for machine processing
  • Data must be in the middle of blocks
  • Do not use “$” for reporting amounts
  • Do not use “0” or “None” for blank reporting
  • Do not staple or fold forms

Please note that this is just a sample. There are entire publications filled with requirements that must be followed when filing forms with the IRS. Consequently, paper filing can be cumbersome, so we recommend finding an e-Filing software provider.

Due to the extensive requirements that must be followed for the filing to be accepted, we do not recommend sending forms by mail.

What is Form W-3?

IRS Form W-3, Transmittal of Wage and Tax Statements, is only required when the employer is opting to paper file. A Form W-3 is a transmittal, or cover sheet, that comes before the stack of W-2 forms. It provides the SSA with a summary of the information being filed. Employers should never file a Form W-3 by itself; it should always be accompanied by the corresponding Forms W-2.

The form includes information about the filer, total number of forms, totals of all of the wage, withholding, and other amounts being filed.

Which copy of the W-2 do I use?

Form W-2 has more copies than most other form types – a total of 6 different copies, in fact. Each copy serves its own unique purpose. Employers should use Copy A when submitting a paper filing to the SSA. For a quick overview of each copy’s purpose, check out File & Distribute Forms W-2.

Can I use any type of paper to file?

No, you cannot simply print out Copy A of Form W-2 on regular printer paper to send to the SSA. It will not be accepted.

There are paper and ink requirements that must be followed so that the filing is accepted and considered valid. Employers can order official forms from the IRS to ensure that all requirements are met.

Where do I mail W-2 forms to the IRS?

Once the employer has finished completing the Form W-3 and Forms W-2, the next step is mailing the filing to be validated and accepted. When mailing using the USPS, employers should send the Form W-3 and Copy A of Forms W-2 to the following address:

Social Security Administration
Direct Operations Center
Wilkes-Barre, PA 18769-0001

Please note that postal regulations require that packages with forms must be sent via first-class mail.

If using a private delivery service (FedEx, UPS, etc.), the delivery address is different. If this is the case, employers should send the Form W-3 and Copy A of Forms W-2 to the following address:

Social Security Administration
Direct Operations Center
Attn: W-2 Process
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997

Can I submit an electronic filing?

Yes, of course! E-filing is encouraged by the IRS and offers many benefits. These benefits include immediate submission, quick turnaround time, status updates, and more.

Employers filing more than 250 forms are required to file electronically, unless granted a waiver from the IRS. When opting to e-file, be sure to use an IRS authorized transmitter to make e-filing quick and easy.

Rejections, Errors, and Corrections

It’s important that you take the time to review the information you’re reporting on your Forms W-2 for accuracy prior to distributing and filing. This will minimize the risk of common errors that may result in penalties and fines.

Even with careful reviewing, mistakes can happen! If your filing has errors or is rejected, you can make corrections and resubmit.

Why was my filing rejected?

The SSA will reject Form W-2 filings for the following:

  • Medicare wages and tips are less than the sum of social security wages and social security tips
    • Medicare tax is greater than 0
      Medicare wages and tips are equal to 0
  • Social security tax is greater than 0
    • Social security wages and social security tips are equal to 0

Additionally, the SSA will reject Form W-2 and W-2c filings for household employers for the following:

  • The sum of social security wages & social security tips is less than the minimum yearly earnings
  • Medicare wages and tips are less than the minimum yearly earnings subject to social security and Medicare tax withholding

If the above scenarios occur, the SSA will notify the employer via email or postal mail that action is required to correct the forms and resubmit. Do not mark the submission as “corrected” or “amended.” The forms will still be classified as originals.

Form W-2 errors

  • Incorrect EIN
  • Missing or invalid name and SSN combination
  • Invalid employer or employee street address
  • Wrong box 12 code or amount

This is just a small sample of the kind of errors that can occur in a Form W-2 filing. Check out our article Common Form W-2 Errors for an in-depth look at these common mistakes.

How do I make corrections?

If your filing is returned with a status of “Accepted with Errors,” then you must follow up on the errors. Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal of Corrected Wage and Tax Statement are used to submit corrections to the SSA.

IRS Form W-2C Copy A
Image of Form W-2C Copy A

Form W-2c has two sets of each of the boxes; one set for ‘previously reported’ information and the other set for ‘correct information’.

When submitting Form W-2 corrections via Form W-2c, you must always include the following:

  • a. Employer’s name, address, and ZIP code
  • b. Employer’s Federal EIN
  • c. Tax year/Form Corrected
  • d.-i. Employee’s information
    • Please note: if you only need to update the employee’s address do not submit a corrected form to the SSA. Only issue a copy to the employee.

For boxes 1-20, you do not need to input all of the information again. You should only complete the information that needs to be updated. Complete both the ‘previously reported’ and ‘correct information’ boxes for only the amounts that need to be corrected.

Again, the IRS generally recommends filing the corrections using the same medium as the original forms. If you e-filed the original forms, then you should e-file the corrections and vice versa if the original forms were paper filed.

When is the W-2 Correction deadline?

Employers should file Forms W-2c and W-3c as soon as possible after an error is discovered. Generally, employers will have 30 days to complete the corrections. If they are not completed within that time frame, then they may incur fines or penalties.

If you’re looking for a guide to Form W-2c with scenarios and specific correction instructions, we recommend checking out our article, Form W-2C: How & When to Use.

Frequently Asked Questions

What is the difference between Forms W-9 and W-2?

A W-2 is issued by employers to their employees in the previous tax year.

Independent contractors complete Form W-9 before providing a service. It provides the hiring company with basic information necessary for year-end reporting.

If the services provided by an independent contractor are less than $600, then a Form W-9 is not required. The employer may quote an independent contractor less than $600, but if, at the end of the service, the amount totals more than $600, a W-9 must be issued. This ensures that the hiring company can correctly report the nonemployee compensation income amounts.

What if my employee says that the information on their Form W-2 is incorrect?

Employers should address and correct errors on Form W-2 as soon as possible. The employer should file and furnish a Form W-2c with the updated information.

If an employee is having issues getting an updated Form W-2c, they should follow the steps outlined by the IRS. This will ensure that they are able to file personal taxes before the deadline.

What if the employee worked multiple jobs?

It’s very common for individuals to work many jobs in one year. In this case, each employer will issue a separate Form W-2.

Conclusion

The IRS Form W-2 has been around for a very long time, and it will likely be around for years to come. We’ve given you insights on how to analyze a W-2 and remain compliant with the SSA and IRS, but there’s always more to learn! Since there are a total of 29 codes for Box 12, we recommend reviewing our W-2 Code Guidance PDF for a full break down.

BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.

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