How To Prepare W-2 Wage and Tax Statements
What is Form W-2?
Form W-2 includes information on employee wages paid the previous calendar year and withholding from those wages, as well as information on benefits, and other deductions from wages.
When are W-2 Forms Due?
W-2s are due to employees by the end of January, for the previous calendar year. If January 31 is a weekend or holiday, the reports are due the next working day. Here are the key end-of-year payroll tax reporting due dates for the current year.
W-2 forms are due to the Social Security Administration by January 31. After you have given W-2 forms to employees, you must also submit these forms, along with transmittal form W-3, to the Social Security Administration (SSA).
The January deadline is an attempt to curb tax fraud, but it means that you should give W-2 forms to employees earlier in January, so they have an opportunity to look them over before they are filed. Earlier distribution to employees will lessen the errors in the W-2 forms, so you don't have to file a corrected W-2.
Gathering Information to Prepare W-2 Forms
The information for this form comes from your payroll register, which shows year-to-date totals for each employee for wages and withholding, along with deductions for medical plans, health savings accounts, and other items.
Here are more details about the information you will need in order to prepare these W-2 forms.
Time Required: Depends on number of employees and number of deductions and additional payments
Here's How to Prepare Form W-2
For each W-2 you prepare, you will need to include information about your business: Employer ID Number (EIN) and employer name and address.
You may want to add an internal control number on each W-2, if you are paying many employees. You can generate the number yourself, or your payroll preparation software may generate this number.
Employee EarningsYou will also need
- Total wages, tips, and other compensation (Box 1). This is gross pay for all hourly and salaried employees.
- Total amount of withholding(Box 2)
- Total Social Security wages (up to the Social Security maximum)(Box 3). Some pay is not included in Social Security wages, so you will need to reduce the entry by these amounts.
- Total Social Security Tax Withheld (Box 4)
- Total Medicare wages and tips (same as total wages)(Box 5)
- Medicare tax withheld (Box 6). This amount includes the amount of additional Medicare tax for higher-paid employees.
- Social Security tips (Box 7) and allocated tips(Box 8)
- Next, you will need information about employees and total wages and withholding for each employee for last year:
- Other payments. You may have paid advance EIC payments (earned income credit)(Box 9) and dependent care benefits (Box 10) paid to employees.
- Information on Retirement Plan Participation, Statutory Employees
- On each W-2 you must check the appropriate box if the employee participates in a retirement plan (Box 13) or a non-qualified plan(Box 11), if this employee is a statutory employee (Box 13), or if the employee received third-party sick pay (Box 13.
- Box 12
- Box 12 is for amounts for other compensation or reporting, to enter into 1-4 boxes. Some of the most common information for Box 12:
- Uncollected Social Security, RRTA (railroad retirement), or Medicare tax, on tips or group life insurance
- Elective deferrals to 401(k), 403(b), and other qualified retirement plans
- Non-taxable sick pay
- Golden parachute payments
- Excludable reimbursed moving expenses
- Contributions to medical savings accounts or health savings accounts
- Non-statutory employee stock options
- Designated Roth contributions under 401(k) or 403(b) plans
- Cost of employer-sponsored health coverage, using Code DD, according to the reporting requirements of the Affordable Care Act
- Box 14
- Entries in Box 14 are for other deductions or compensation that must be disclosed to employees for their tax returns. For example
- After-tax pension
- Auto reimbursements
- Special taxes for California, New York, New Jersey, and Washington
- Charitable contributions deducted from employee pay
- Health insurance and fringe benefit deductions
- Uniform deductions (for cost of uniforms)
- Union dues deductions
- Nontaxable income
- Vehicle expenses included in wages (100% of lease value of vehicle furnished to employee and included in Box 1 wages)
- There is also a box for "Other-not on list" items you have deducted from employees
- State and Local Information
- In this section, you will enter information about state and local wages and withholding. Enter:
- Note that there is space for two states and two localities on the form. If someone has worked in more than two states or localities during the year, use a second W-2 to include the additional information.
- Your two-letter state code and your business's state tax ID number (check with your state's department of revenue)(Box 15)
- State wages (Box 16)
- State income tax withheld (Box 17)
- Local wages, if any (Box 18)
- Local income tax withheld (Box 19)
- Locality name (Box 20)
- Check For Accuracy
- Pre-printed Forms
- If you are printing your own W-2 forms, you may obtain them from several sources:
- The W-2 is a multi-part form. Here are the pages of this form:
- The IRS Forms Order website (takes 7-15 days)
- An online forms supplier or office supply store.
- Copy A goes to the Social Security Administration. Copy A is usually printed on a red form.
- Copy 1 is for the city, state or locality
- Copy B is for filing with the employee's federal tax return
- Copy C is for the employee's records
- Copy 2 is another copy for another city, state, or locality
- Copy D is for the employer's records.
- Print W-2s
- Print out the forms, checking to see that they align with a pre-printed format if you have one.
- Distribute the W-2s
- To the Employee: Copies B, C, 1, and 2
Tips on Preparing Form W-2
- Your business's state tax ID number is NOT your state sales tax ID number. Many states use the federal tax id number (EIN) and add digits onto the end. Check with your state department of revenue for information.
- Tip income. Employee tip income is subject to Social Security taxes and Medicare taxes, including the additional Medicare tax.
- Box 12 - More than 4 Items
- If you have more than 4 items for Box 12, you will need to put the additional items on a second W-2. But don't include the employee's wage and withholding on this additional W-2.
- Form W-3, along with Copy A from all employee W-2 forms, is due to the Social Security Administration by January 31. When you have completed the W-3 and you have all the W-2 forms, send these to employees as soon as possible, so they have an opportunity to review the forms. If they find errors, you can fix them before you send the consolidated report to the SSA by January 31.
- The information provide in this "How To" is for general purposes, to help you collect the information you need to prepare and print W-2 forms. It is not intended to be tax advice and in no way does this information attempt to be comprehensive or to tell you all the information that must be included in your W-2 forms. Talk to your tax adviser for information about your specific situation.