January is at all times a hectic month for accounting departments and minor business owners as they create tax documents for workers and their businesses. A worker’s Wage and Tax Statement, known as the W-2, is the authorized document used to report taxable earnings plus the sum of tax withheld for Social Security, Medicare, and state and local governments. This significant document is not merely used by the Internal Revenue Service (IRS) for tax purposes, however, throughout a worker’s lifespan, his income history is used by the Social Security Administration (SSA) to decide entitlement and benefits upon retirement.
What Is Form W-2?
It consists of data on worker wages paid the preceding calendar year and withholding from those wages, in addition to info on benefits, and additional deductions from wages.
As fall ends and winter starts, managers start preparing for the upcoming tax season. One query that numerous managers and HR directors get asked every year spins around the W-2 vs last pay stub. When workers get their W-2s every year, they see a difference between their last pay stub and W-2 form.
When Are These Forms Outstanding?
W-2s are outstanding to workers by January 31, for the preceding calendar year. If it is a weekend or day off, the reports are outstanding on the subsequent working day.
Understanding the W-2
Before devoting time to filling out any form, make sure you are using the accurate one. Managers are required to fill out W-2 forms for any worker to whom they made any payment, as well as non cash payments, in exchange for services throughout the year.
Even if you are not an authorized business, however, pay somebody as a household worker, you have to file a W-2 for them. Though, if you paid a worker (nonemployee) for work, you will have to use a changed form, the 1099-MISC for independent contractors.
Select Your Filing Format
You have 2 choices when it comes to filing your W-2 forms. You can fill out paper forms or file them by electronic means on the SSA’s Business Services Online website.
- Paper Forms
If you select to use the paper forms, you have to order them from the IRS. Simple online ordering is accessible on its site. Make sure to order the form for the right year; in January you would be filling out forms for the year that just ended, not the present year. At all times print legibly in black ink. You might submit up to 249 worker forms using this technique.
- Electronic Filing
A quicker way to file your forms is by using the free Business Services Online (BSO) site run by the SSA. You will have to create an account and password, which should be changed frequently.
You can hand input up to 50 workers per submission through this system. You can similarly upload a formatted remuneration file for huge numbers of workers. Guidelines for formatting are downloadable from the BSO site.
Collecting Data to Prepare W-2 Forms
The data for this form comes from your payroll register, which displays year-to-date totals for every worker for wages and withholding, along with deductions for medical plans, health savings accounts, and additional items.
How to Create Form W-2
This info is a common overview of the procedure for finishing a form.
Manager info: For every W-2 you make, you will have to include info about your business, including employer ID number and his name and address.
Control number: You might need to add an internal control number on every W-2 if you are paying a lot of workers. You can create the number yourself, or your payroll preparation software might create this number.
Review Your Finalized W-2s
After adding all your worker W-2s, check them for precision. The SSA suggests printing unauthorized copies and providing them to your workers to check. Check precisely for name spellings, accurate addresses, and accurate Social Security numbers. If you submit the forms and find any mistakes later, you will have to resubmit an amended form.
Print and Hand out Your Forms
When everything is confirmed as accurate, print your W-2s and hand out them to your workers. Be sure to mail them before January 31 to meet the IRS deadline.
Submit Forms to the SSA
The final step is to file all the forms with the SSA. Though the IRS and state and local administrations use the W2 to confirm earnings, it is the Social Security Administration that supervises the filing of these forms. With both the paper and electronic means, you will similarly get a W-3, which is the Transmittal of Remuneration and Tax Statements form; it should be submitted along with every set of W-2s.