A W-2 form is used for filing taxes. It is a form that an employer must fill out and then provide to the employee during the tax filing season.
A W-2 form is used for filing taxes. It is a form that an employer must fill out and then provide to the employee during the tax filing season.
1 Create a W-2 Form in less than 5 minutes
2 Professionally reviewed
3 Print and export to Word or PDF in seconds
Answer a few simple questions.
Create an account.
Print and download.
A W-2 Form is used for filing taxes. It is a form that an employer must fill out and then provide to the employee during the tax filing season. A W-2 must have certain information listed on it, including wages earned and state, federal, and other taxes withheld from an employee's earnings. The W-2 Form must be provided to an employee by January 31 so that they can file for the previous year's taxes.
Employers must also file W-2 Forms with the Social Security Administration in order to keep them aware of an employee's earnings by January 31.
If you need to set up a W-2 Form, make sure you include all the required information. You will also need the employee's personal information, such as full name, address, social security number, and employee ID if possible. Check for accuracy, as misinformation could cause problems with tax filing.
Click here to get started now!
So, let's say your start-up is finally up and running. You've got your documents in order, your business plan nailed down, and a top-notch core staff working like clockwork. Now it's time for the next step - hiring some employees. That means it's also time to get acquainted with the W-2.
The W-2, or "Wage and Tax Statement," is the form the IRS uses to record employees' taxable wages. (Please note: this form is only used for "real" employees, meaning people on payroll. Hiring independent contractors and freelancers involves a completely different set of forms. An employer needs to complete a W-2 Form for each employee, and submit copies of the form to the the employee, the Social Security Administration (SSA), and the state or local tax institution by certain deadlines, as well as file a copy with his or her own taxes.
How do I fill out the W-2?
As tax documents go, the W-2 Form is short and sweet. However, it does ask for a hefty chunk of information, most of which can be pulled from your payroll register and other records. To make life easier, I've broken said required information into categories:
Information about the employer (you):
· Full legal name
· Full address, including zip code
· Employer Identification Number (EIN) - acquired via the IRS website
· State ID number - acquired via your state website
· Control number - the number your payroll processing software assigns the W-2 for record-keeping purposes.
Information about the employee:
· Full legal name, including middle initial if applicable
· Full address - Be sure you have the current one.
· Social Security Number (SSN) - Triple-check to be sure you have this right.
Information about compensation:
· Total taxable wages - This includes wages or salary, bonuses, reported tips, and other miscellaneous compensation.
· Medicare wages and tips (Box 5)- This is sometimes a bigger number than the one in Box 1, as it includes an employee's total taxable compensation as well as fringe benefits, such as 401K, that aren't subject to regular income tax.
· State wages and tips (Box 16) - Total taxable wages & tips the employee has earned from you within a single state. If the employee has worked for you in multiple states, you will need to itemize and list the amounts earned in each state.
· Local wages and tips - Total wages and tips subject to state and/or municipal taxes.
· Allocated tips - This only applies if you run a restaurant or other "tip-centric" establishment. It's customary to set aside a percentage of gross sales (usually 8%) to be paid out as tips. This acts as insurance for waitstaff on slow days and for you during tax season. To calculate allocated tips, subtract the amount of tips the employee has reported for that year from the set percentage. Fill in the box only if the difference is a positive number. This will ensure that the employee pays at minimum the established percentage.
· Social Security Tips - Total tips reported by your employee throughout the tax year.
· Other compensation - This includes the details of all other forms of compensation, such as sick pay, pension payments, deferred wages and dependent care benefits.
Information about taxes withheld
Instructions for calculating the following are included with the W-2. Always be sure you double-check your math!
· Federal income tax - Use Publication 15 as your guide when calculating this.
· State income tax - Total state taxes withheld from employee's wages throughout the year; more information can be found on your state website.
· Local income tax - Total local taxes withheld from employee's wages throughout the year
· Locality name - a short description of the state or local tax being paid
· Social security tax - Usually a 12.4% deduction, with 6.2% coming out of the employee's wages and 6.2% coming out of your own. There is a maximum amount that can be taxed, but it changes by year.
· Medicare tax - Typically a 2.9% tax in total, with 1.45% coming from the employee and 1.45% coming from you.
A Few Things to Remember
· Check your work - This means double-checking math, spelling, and ID codes such as the SSN.
· Meet your deadlines. - Tax institutions do not like tardiness, and your employees need their copies by the dates they are promised. Deadlines can vary by year or circumstance. Check this section of the IRS website for details.
· Submit copies to all required parties. This means six copies total:
Copy A goes to the SSA
Copy 1 goes to your state, city or local tax department (you can learn more about your area's requirements on its official website.
Copies B, C and 2 go to the employee
Copy D should be retained by you for four years
The W-2 Form is probably one of the most common tax forms used by laypeople today, as every employee must receive one prior to filing their income taxes out and every employer must produce them. The mere mention of a W-2 Form can cause confusion on both sides of the equation. After all, while you know you have to complete a W-2 Form or forms, you don’t want to complete the form incorrectly and cause additional problems.
So, just what is the purpose of the W-2 Form? The W-2 Form is how an employee’s total sum of wages and compensation are reported to the IRS. The employer meets their obligation by completing and filing one for each and every employee of their company for the calendar year; the employee, then, turns around and uses the completed W-2 Form to report their income and complete their taxes.
The myriad boxes and blanks on the W-2 Form can seem frustrating at first glance. Fortunately, once you understand what the W-2 Form is asking for, you can fill them out for all of your employees fairly quickly. Below is a summary of the boxes on the form, and what information they contain or require.
Box A: This box contains the employee’s Social Security Number. If it is not on the form, or incorrect, it could prevent the employee from filing their taxes in a timely manner
Box B: The Employee Identification Number, a number which is unique to each entity, goes in this box.
Box C: Fill in the employer information here as requested
Box D: This box holds the control number, a code that is generally assigned by the company’s payroll processing system
Box E: Full name of the employee
Box F: The employee’s home address
Box 1: This box includes the wages, tips and other compensation paid to the employee . This number should include hourly wages or salary, tips and bonuses.
Box 2: The amount of money which was withheld for federal income taxes goes here.
Box 3: This box requires a listing of the individual’s Social Security wages.
Box 4: In this box, you’ll list out how much Social Security tax was actually withheld.
Box 5: We move on in this box to the amount of income eligible for Medicare tax.
Box 6: Here, the amount of actual Medicare tax that was withheld is listed.
Box 7: The amount of tip income that you reported to your employer will go in this box.
Box 8: This box includes any tip income that was assigned to you as an employee by your employer.
Box 9: No longer in use since 2010.
Box 10: In this box, you will find any amount of money for dependent care that was reimbursed through a flex spending account or by your employer.
Box 11: This box, which is rarely used, includes moneys an employee received through a non-qualified compensation plan or non-government pension plan.
Box 12: Deferred compensation is listed here, and usually involve savings or retirement plans.
Box 13: There are three boxes here, which can be checked off if any of the things listed applied to the employee’s status that year.
Box 14: Any additional information that your employer needs to report can be listed here.
Box 15: The employer’s state employer tax identification number will be listed here. If you worked in several states for one employer, there may be more than one number.
Box 16: Here the total number of taxable ages earned in a state will be listed.
Box 17: The amount of state income tax withheld should be listed here.
Box 18: The amount of an employee’s wages that are subject to local, city or other taxes goes in this box.
Box 19: The amount of local income tax that was withheld.
Box 20: Here, you’ll simply list the locality or city being paid locally.
With this information, you can gain a thorough understanding of what the W-2 Form requires and complete or use them quickly and efficiently.
Most employed people are probably familiar with the w-2 form. It’s an information return form used by employers to report to the IRS for the purpose of income taxes. The w-2 form reports wages, tips, and other compensation paid to an employee. It also reports the employee’s income and social security taxes which have been withheld. This wage information is reported to the employee, and to the Social Security Administration, who then shares the information with the Internal Revenue Service.
The lettered boxes on the form contain basic information about the employee and the employer. They read as follows:
Box a. Employee's social security number
Box b. Employer identification number (EIN)
Box c. Employer's name, address, and ZIP code
Box d. Control number
Boxes e and f. Employee's name and address
Box d can be left blank. It may be used to identify individual W-2 Forms.
The rest of the form is comprised of a list of numbered boxes. These convey earning information and read as follows:
Box 1—Wages, tips, other compensation.
Box 2—Federal income tax withheld.
Box 3—Social security wages.
Box 4—Social security tax withheld.
Box 5—Medicare wages and tips.
Box 6—Medicare tax withheld
Box 7—Social security tips.
Box 8—Allocated tips (not applicable to Forms
W-2AS, W-2CM, W-2GU, or W-2VI).
Box 9. Do not enter an amount in box 9.
Box 10—Dependent care benefits (not applicable to
Forms W-2AS, W-2CM, W-2GU, or W-2VI).
Box 11—Nonqualified plans.
Box 12—Codes.
Box 13—Checkboxes
Box 14—Other.
The codes for Box 12 can be found on the IRS website. They describe a variety of other forms of income the employee may have received such as nontaxable sick pay and adoption benefits. Do not enter more than four items in Box 12. The checkboxes in Box 13 apply to statutory employees (such as certain types of drivers), active recipients of retirement plans, and third-party sick pay.
Common errors on the W-2 Form include making entries using ink that is too light, or making entries that are too small or too large. Make sure to use black ink and 12-point Courier font, if possible. Also, make sure not to add dollar signs to the money-amount boxes. They have been removed from Copy A and are not required. Do not omit decimal points and cents from entries. Most importantly, do not incorrectly format the employee’s name in box e. There are stringent penalties for employers who fail to complete the W-2 Form by the filing deadline, January 31st of each year, so it’s very important to complete the form in a timely and accurate manner.
Starting your own business is an exciting endeavor and a dream come true for many of us. You get to be your own boss and earn a living pursuing your very own vision. But it does come with a lot of responsibility and, most of the time, at least some financial stress.
Fortunately, the Internal Revenue Service actually helps small business owners by providing a bit of a tax break, taking off some of the fiscal strain while you are in the beginning stages of building your empire. In the first months and years, startups need to focus on minimizing costs as much as possible. That's why knowing the ins and outs of tax filing for startups is crucial -- it can mean the difference between sinking and swimming in the first years of your business.
Check out this guide to navigating startup taxes so you can stay on top of your finances and your filings when tax time rolls around.
Filing taxes as a startup can be a lengthy process, so don't leave it until the last minute. Ideally, you should start your paperwork as early as possible, but make sure to get going at least a month before Tax Day. There are always expenses and payment receipts that need to be chased down, and especially in the early years of your business, you probably won't have a smooth process in place to ensure everything gets wrapped up quickly and neatly.
If you can afford to do so, hiring an accountant will make your job much easier. Try to hunt down an accountant who is skilled in working with startups -- such a person will be able to provide much better advice about credits and deductions than a more traditional firm that is used to working with large businesses and salaried employees. You don't technically need an accountant, but chances are, in the early years, you are going to be too busy running your business to worry about all the paperwork yourself.
Accountants can also offer critical advice and help you make wise business decisions as your company expands. The American Institute of Certified Public Accountants (AICPA) is a recognized and reliable source for finding an accountant. It has a directory of CPAs, accounting companies and local accounting societies. You can also ask other small business owners for recommendations.
Startups, like all businesses, are required to pay taxes on a quarterly basis -- except for the first year. You can wait until April 15 and pay in bulk after your inaugural year, but that doesn't really do you any favors. It's good to get into the practice of paying taxes every three months. Go ahead and establish a habit of setting aside a percentage of each payment you receive and then reviewing your profit/loss statement every quarter to determine how much you owe. An accountant can help you estimate these payments and set up a dedicated account to contribute money toward these payments.
Prices for an accountant will vary depending on where you are located and whether he is certified or not, but according to Entrepreneur, you can expect to pay fees of between $100 and $275 per hour.
The type of business entity you choose determines how you will report your taxes and what your tax rates will be. You can choose a sole proprietorship, partnership or LLC. There is no tried-and-true way to determine this -- it's best to speak with an advisor or CPA to find out which model best fits your startup. The right choice will help make more capital available for running your business.
Now that you're running a business, one of the best ways you can save money is by keeping track of every single business expense down to the last penny. If you have to commute to meet partners or investors, you can deduct miles driven and gas expenses. Office supplies, rent on office space, food and beverages for employees, hotel stays while you're drumming up new clients or attending conferences -- don't let these slip through the cracks.
The best way to document expenses is to use a dedicated software program or app on your phone so you can enter the expense immediately. Expensify is a great one for tracking expenses. Milebug helps you keep track of travel distances. Mint or QuickBooks can help you record a variety of expenses so you have detailed notes for your taxes.
Startup costs are a little different than regular business deductions because they have to be incurred during the planning and development stage of your business -- they are literally the costs that are helping you "start up." Many startup owners fail to recognize that startup costs include everything you're doing to build and promote your business, including market research, location scouting for your office, staff training, legal fees, communications, etc. Advertising your company or opening is also a legitimate startup expense. Programs such as TurboTax will walk you through all these expenses, as should an accountant if you hire one.
Many startup expenses, such as organizational costs, can either be amortized or deducted in full the first year. If you choose to amortize, make sure the costs are incurred before your business opens. Amortization is a good option if you don't expect to bring in a ton of cash your first year -- it lets you stretch out the deduction over future tax years when a tax break would be more beneficial.
If you are a startup company with annual gross receipts less than $5 million, you can apply up to $250,000 of your R&D credit against your payroll tax liability. This is a recent change that was made to help new small businesses receive credit for R&D/ However, the company can't have had any gross receipts before 2012.
The work opportunity credit gives a federal tax credit to employers who hire from certain groups, including food stamp recipients, veterans and other designated community residents. For most of these groups, the credit is up to $2,400 per qualified employee in their first year of employment. The veterans program offers employers a tax credit of up to $9,600 in the first year. Taking advantage of this credit can help reduce your overall tax burden.
If you use a freelancer or contractor during the year and pay them more than $600, you have to issue 1099-MISC forms to both the employee and the IRS. If you don't, you could face a costly penalty.
The Small Business Administration is a great resource for helping you find others in the startup community who can provide valuable advice. SBA provides business counseling and training across the country and can also connect you with specific assistance depending on your needs, such as Women's Business Ownership Representatives and the Minority Enterprise Development Program.
Taxes don't have to be a daunting task! If you keep clear records, stay on top of your paperwork throughout the year, and work with a reputable software or accountant, you can help your startup save money and increase your chances of success.
