What is Form W-2 and Who Needs One?

Tax reporting requirements and payments can make tax season a stressful and overwhelming time for most employers. One of the first things to check off your list is distributing Form W-2 to employees. Employers are required to provide a copy to their employees, the Social Security Administration and most states. This must be done accurately and in a timely manner or you risk being penalized.  

What is Form W-2? 

Form W-2 is the IRS’ Wage and Tax Statement that ensures both employee and employer taxes have been recorded and filed properly. The form lists an employee’s wages for the year, which includes their wages, tips and any other compensation for both salaried and hourly workers.  

It shows the amounts withheld from an employee’s pay for federal income taxes, state income taxes, share of Social Security, Medicare taxes and benefits information such as: 

  • Contributions your company made to an employee’s health savings account (HSA) 
  • Your company’s cost of providing group term life insurance 
  • Your company’s share of the employee’s health insurance premiums paid if you have 250 or more employees 
  • Deductions from the employee’s pay for their contributions to a 401(k)  

In addition, there are several boxes on the form for basic employer and employee information: 

  • Employee’s Social Security number 
  • Employer Identification Number 
  • Employer’s name, address and ZIP code 
  • Employee’s first and last name 
  • Employee’s address and ZIP code 

When are W-2s Due? 

Employers must provide W-2 forms to employees no later than Jan. 31, either by mail or electronically. This will give employees ample time to review their W-2 to make sure the information on the form is accurate before they file their taxes.  

It’s important to note employers must also file W-2 forms with the Social Security Administration and most states by Jan. 31.

This ensures that the Social Security Administration has accurate records of employee earnings and contributions to Social Security and Medicare. 

Do I Have to Provide a W-2 to Every Employee? 

Your company will need to provide a W-2 to any employee that earned wages during the year. Employees will receive three copies of the W-2. One copy for filing their federal tax return, one for filing their state tax return and one for their own records.  

Employees appreciate communication from their employer about when they should expect their W-2 and if they are being sent through the mail or accessible electronically.  

If you mail the W-2 to previous employees and it is returned to you, you should keep it for your records. 

What are W-2 Penalties? 

The most common reasons an employer is penalized are submitting the forms late or failing to provide complete and accurate information on the forms. If your company does any of these things and can’t show reasonable cause, you may face a penalty depending on when a correct form is eventually filed, which varies based on your size. 

Businesses with average gross receipts of $5 million or less over the past three years, can be fined: 

  • $60 per form filed up to 30 days late, up to a maximum of $206,000 
  • $120 per form if you file them after 30 days but before Aug. 1, up to a maximum of $588,500 
  • $310 per form for submissions made on or after Aug. 1 or not at all, up to a maximum of $1,177,500 

Businesses with gross receipts over $5 million in the last three taxable years can face be fined: 

  • $60 per form filed up to 30 days late up to a maximum of $588,500 
  • $120 per form filed 31 days late through Aug. 1, up to a maximum of $1,766,000 
  • $310 per form for those filed on or after Aug. 1, or not at all, up to a maximum of $3,532,500 

Questions? 

W-2 forms can be complicated. Understanding the requirements and expectations can help you avoid unnecessary stress during tax season. Consider getting assistance from an Adams Brown payroll or tax advisor before you attempt to complete them yourself.