Tax season can be an overwhelming time for small business owners, but knowing your way around a W-2 form is an important first step for a hassle-free filing process, from start to finish.
Understanding how to complete and file a W-2 form isn't always obvious. Costly errors can be made, employees may have endless questions, and it all takes too much time out of your already tight schedule as a company owner. That's where our guide comes in handy.
Whether you're a seasoned entrepreneur looking to level up your existing knowledge, or a first-time employer learning about the various ways to send W-2 forms to your employees, we'll help you familiarize yourself with every aspect of the W-2 filing process.
Avoid penalties, additional costs and long-term headaches with our comprehensive guide to the W-2 for the 2024 tax season.
Think back to your first job. Remember that W-2 form you received each year? Now that you're a small business owner, you're responsible for distributing these forms to your employees.
The W-2 form is a standardized income and tax statement that U.S. employers must complete and submit to the Internal Revenue Service (IRS) every year. It's an official document summarizing your employees’ annual earnings and the amount of tax you withheld in the previous year.
As an employer, you must complete a W-2 for each employee who was paid a minimum of $600 over the course of the year. You are required by the IRS to issue this form to your employees at the beginning of each year. It should be completed with employee information such as wages, salaries, tips, bonuses and other forms of taxable compensation. It is important to stress that filing your W-2 forms is mandatory.
The W-2 also includes a list of deductions such as federal and state income taxes, Social Security and Medicare taxes, and must include deductions for retirement plans, for example.
All employers must send out W-2 forms to their employees no later than January 31, 2024, since they are necessary for tax filing. W-2 forms should be distributed before tax season to ensure smooth processing of income taxes.
The W-2 serves as a vital link in the U.S. income tax regulatory system, with each entity using the official document for a variety of purposes.
Employers like you are required to distribute copies of every employee's W-2 form. Copies are sent to the Social Security Administration, the IRS, state and local tax authorities, as well as to the respective employee. The W-2 helps you document the wages you pay each employee and tracks the amount of taxes you've withheld throughout the year.
Your employees use the W-2 to report their wages earned and the amount of tax withheld by their employer throughout the year. It's an essential document they use to file accurate and swift tax returns with the IRS.
Federal (IRS), state and local tax authorities use W-2 forms to verify that individuals have paid the correct amount of income tax, Social Security tax, and Medicare tax based on their earnings. When W-2s are furnished to state tax agencies as well as Federal, agents cross-reference the accuracy of individual returns with the data provided by their employers.
The W-2 form provides a clear summary of key information that is vital for understanding an employee's income and tax withholdings at a quick glance.
Here's a brief overview of the information you'll find on every W-2 form that you issue.
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Knowing how to fill and process W-2 forms correctly can save you hours in the long run. If you're eager to minimize mistakes, streamline your filing workflow, avoid costly administrative errors, and save money, adhere to a few simple, yet key, detailed instructions and the process should be pain-free.
Whether you choose to file manually, use payroll software or seek help from a tax professional, it's essential for business owners to understand what information must be reported, and comprehend the meaning behind W-2 terminology. These details must be accurate to avoid penalties and filing issues, and your final numbers need to be reviewed for correctness.
The following guided instructions, tax and income-reporting rules will help you complete your W-2 forms correctly. You can also refer to the guidelines provided by the IRS and follow along with this W-2 PDF to locate each box.
W-2 Box
Instructions (print with legible information)
Box A: Employee's Social Security Number
Enter your employee's nine-digit social security number. A social security number is formatted like this: XXX-XX-XXXX. Verify social security numbers as you enter them to avoid errors.
Box B: Employer Identification Number (EIN)
An Employer Identification Number (EIN) is assigned to your business by the IRS, and is required to hire employees. Your government-issued EIN is the same on every employee's W-2 and follows this format: XX-XXXXXXX.
Box C: Employer's name address, and ZIP code
Place your business's full legal name and address in Box C. Your business address may differ from where your employees conduct work.
Box D: Control number
A control number helps you identify each unique W-2 form internally. If your business does not use control numbers, leave Box D blank.
Box E: Employee's name
Enter your employee's legal first name, middle initial and last name on this line. Use the employee's SSN as reference.
Box F: Employee's address and ZIP code
Enter the current address of each employee. Ensure that this information is up-to-date.
Box 1: Wages, tips and other compensation
Calculate taxable income. Enter the amount of wages, tip income and other compensation subject to federal income taxes. This number includes your employee's bonuses and taxable benefits like group term life insurance. Note: do not include pre-tax benefits like contributions to a 401(k).
Box 2: Federal income tax withheld
Declare the amount of any federal income tax you withheld.
Box 3: Social Security wages
Report your employee's total wages subject to Social Security tax. This number should not be higher than the Social Security wage base. Updated annually, for 2023, the wage base is $160, 200.
Box 4: Social Security tax withheld
Enter the amount you withheld from your employee's Social Security wages only (do not include your share). Employers and employees split social security tax equally. For 2023, the Social Security tax rate remains at 6.2 percent of their wages, up to the maximum Social Security wage base. Box 4 cannot exceed (taxable threshold) x (employer’s share), or $9,932.40 for 2023.
Box 5: Medicare wages and tips
Enter the amount of wages subject to Medicare tax. Unlike Social Security, there is no Medicare wage base.
Box 6: Medicare tax withheld
Enter how much you withheld from your employee's wages for Medicare tax. Employers and employees both pay the same Medicare tax rates: 1.45 percent each. (Similar concept to Box 4)
Box 7: Social security tips
Did your employee earn and report any tips? Disclose the total here, and don't forget to include this amount in Box 1 and Box 5.
Note: the total of Box 3 and Box 7 should not exceed $160,200 for the year 2023. This total should equal the number in Box 1.
Box 8: Allocated tips
Is your business a large food or beverage establishment? If so, and the amount of tips reported to you is under the IRS's approved percentage rate, you can compensate your employee with allocated tips.
Do not include the amount in Box 8 in Boxes 1, 3, 5, or 7.
Box 9: Advance EIC payments
Leave this box blank.
Box 10: Dependent care benefits
Record the amount of dependent care benefits distributed under a dependent care program.
Benefit amounts over $5,000 are taxable. If you gave your employee more than $5,000, include the excess in Boxes 1, 3, and 5.
Box 11: Nonqualified plans
Enter the amount of nonqualified plan contributions.
Include these amounts in Box 1, too.
Box 12: Codes
Itemize many forms of deferred compensation that apply to your employee. The IRS recognizes over 30 types of box codes (A-HH). Input the code to the left of the line, with the amounts on the right.
Box 13: Checkboxes
Mark any of the boxes that apply to the employee.
Box 14: Other
Report any additional tax amounts that do not have a place in any other sections of the W-2 form. These may include items like vehicle lease payments, or state disability insurance taxes withheld.
Box 15: Employer's state ID
Much like Box B, enter your state-specific business employer ID number. To do so, begin with your state's two-letter abbreviation, followed by your state EIN.
Box 16: State wages, tips, etc.
Enter the employee's wages that are subject to state income tax. Leave blank if your employee works in a state with no income tax.
Box 17: State income tax
Enter the amount of state income tax withheld. Leave blank if you did not withhold state income tax.
Box 18: Local wages, tips, etc.
Report the amount of wages subject to tax by your locality. Leave blank if your employee works in a locality with no income tax requirements.
Box 19: Local income tax
If any of the cities or localities in which you do business require that you pay taxes, enter this amount here. Leave blank if inapplicable.
Box 20: Locality name
Enter the name of the city or locality.
Not all boxes on the W-2 are created equal. Some are straightforward, while others can take some time to figure out. Box 1, Box 3, and Box D frequently pose challenges for employers. Below, let's detail the typical questions and concerns linked to each W-2 box.
Please click here to download a revised W2 PDF form, offering further instructions to help you complete your W-2 forms accurately.
Box 1 on the W-2 details how much you paid your employee in wages, tips, bonuses and other compensation. This box does not take into account pre-tax benefits.
Box 3, on the other hand, indicates the amount from Box 1 that is subject to Social Security tax. The amount in Box 3 may or may not be different from the amount listed in Box 1.
The main difference between Box 1 and Box 3 on the W-2 is that Box 3 on the W-2 doesn't consider pre-tax deductions that reduce taxable income. This means the numerical figure in Box 3 might be higher than Box 1 since it doesn't account for these deductions that lower the overall taxable income for the employee.
Payroll departments use control numbers to provide a unique identifying ID for every W-2 form in their system.
If you're a small business with a handful of employees, you may avoid using a payroll system or control numbers altogether. The lack of control number will not affect your W-2 forms or delay the filing process. What's more, the use of control numbers is optional for employers and the IRS does not require one for any section of an income tax return.
As your staff prepare to furnish their taxes, some will likely flag this as an error. Simply reassure them that they can proceed with their tax filing without it.
If you do not use control numbers, leave your Box D blank for every W-2 form.
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The main difference in filing W-2 forms is how you do it: either using paper or electronic methods. Let's take a look at the different types of ways to send W-2 forms.
Online
Filing electronically is lightning-fast and efficient, making it a perfect solution for larger companies. Online filing also reduces the chance of costly mistakes since tax software can spot errors and prompt you for missing information. Going digital also reduces costs by avoiding expenses like paper, envelopes, printing, postage, and the labor involved in manual filing and organizing.
Employers who choose to file electronically may choose to complete the process through payroll systems.
Additional benefits of online W-2s:
By Paper
Paper filing, on the other hand, might be a more functional solution for small businesses, or owners who are not tech-savvy. Manual work boosts the likelihood of errors, extends filing time, and raises the cost of office supplies.
When mailing W-2 forms, you can opt to mail them yourself, enlist your payroll provider to take care of this for you or hand them out in person. Allowing your payroll provider to mail your W-2s will likely result in faster delivery and fewer errors, but higher costs.
When mailing W-2 forms yourself, deliver to the taxpayer’s address you have on file in their employee contact information. Also, remember to use privacy envelopes to protect your employees' sensitive personal information.
Finally, when filing W-2 forms by mail with the SSA, always include a W-3 form, which provides a summary of all employees’ W-2s. Those choosing electronic methods don’t need to file a W-3. Send your mail to the correct filing address, according to the carrier you choose:
U. S. Postal Service
Social Security Administration
Direct Operations Center
Wilkes-Barre, PA 18769-0001
(for Certified Mail Use ZIP code 18769-0002)
Private Delivery Service (FedEx, UPS, etc.)
Social Security Administration
Direct Operations Center
Attn: W-2 Process
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997
Filing your W-2 forms electronically has clear advantages. If you're a small business owner who chooses this method, there are important rules to be aware of as of 2024:
Employee consent: employers must obtain employee consent for electronic delivery before sending W-2s online. The employee-specific consent must be obtained "in a way that shows he or she can access the statement in the electronic format in which it will be furnished," the IRS states. Moreover, when an employee withdraws their consent, you can no longer deliver their W-2 online.
Required notification: employees must also be explicitly notified of the following information:
See the full list on page 16 of this document.
In the modern world of work-from-home, choosing to electronically transmit W-2s provides employers with numerous benefits, and may be the most efficient method for your small business. Learn more on how to send W-2 forms to your employees.
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W-2s must be filed by the deadline of January 31, 2024 to avoid penalties. The following table outlines the deadlines for sending W-2s to your employees and filing with the SSA, whether it is done by mail or electronically.
Task
Deadline
Distributing W-2s to employees
January 31, 2024
Filing W-2s by paper
January 31, 2024
Filing W-2s online (via Business Services Online)
January 31, 2024
In 2024, in order to account for inflation, the IRS has increased the penalties for late W-2 filings. Penalties and fees are based on the size of your business and take into account the length of the delay period.
Filing Delay
Minimum Penalty
Maximum Penalty
Filed within 30 days
$60 per form
$630,500 per year or $220,500 for small businesses.
Filed after 30 days, before August 1
$120 per form
$1,891,500 per year or $630,500 for small businesses.
Filed after August 1
$310 per form
$3,783,000 per year or $1,261,000 for small businesses.
Employers who file fraudulent W-2 statements will be charged with a minimum penalty of $5000 or more. Finally, employers who intentionally fail to file will be charged $630 per W-2 statement.
When tax season arrives, be prepared when your employees come to you with urgent tax-related questions. Here, you'll find informative answers to common clarifying questions that you can send employees for tax help and support.
Employees may also be interested in learning more about W-4 and W-9 forms as well.
Employers can choose from two different ways to send W-2 forms: electronically or by paper. Employees can start receiving their W-2 online once they provide their employer with online consent. If they have not provided their consent electronically, they will receive a paper version of their W-2.
Employers often issue W-2 forms online through third-party portals. Due to security reasons, the form may not be emailed directly to employees. Instead, employers will issue you a link to download the form. If the employer uses an online portal system, but you have yet to receive your W-2, complete the following steps:
Have you found inaccuracies in your W-2? To file your taxes, your employer-provided W-2 must include income and tax information that is accurate, otherwise, it must be corrected if errors are found. There are a few options available to you.
Before you proceed, review the error on your W-2 is in fact, an error. The amounts shown on your form can often vary from those on your final paycheck of the year. Changes in your taxable income or tax-exempt benefits might lead to minor variations between these totals.
Once this is verified, notify your employer of the error and request a corrected W-2 form be sent to you before the end of February.
If you are filing your taxes online, correct the original W-2 information when you receive your updated one from your employer. Errors are amended with a W-2C form, but you are not required to send the W-2C form when filing online since the IRS will receive the updated version from your employer. When filing via mail, attach a printed W-2C form. (Notice: In addition, a W-2C form is used to correct errors on W-2AS, W-2CM, W-2 GU, and W-2VI)
What happens if you spot significant errors in your W-2, or you think your employer has failed to withhold or is incorrectly withholding federal income and employment taxes?
Contact the IRS or visit a Taxpayer Assistance Center and the IRS will contact your employer. They will be told to amend the form and send you a corrected copy within 10 days, as it is a time-sensitive situation. You can proceed with filing your tax return and declaring what you believe are the correct total wages, and withholding, using Form 4852, also known as the "Substitute for the W-2." Refer to the information found on your pay stubs when using this form.
Yes, filing your taxes is still possible without a W-2.
If you lost your copy or never received one from your employer, contact them to get a copy. You can also contact the IRS for help. IRS agents will need your personal information, employer's name and address to locate a copy.
If these options fail, you can proceed by using IRS Form 4852, the substitute for Form W-2, to file your federal income taxes. To complete the form, you'll need your paychecks for 2023. Be sure to include income details such as wages, tips, social security and medicare wages, and taxes withheld throughout the calendar year.
Form 4852 can also be used if your employer provided you with a W-2 containing inaccurate information.
When filing state taxes without a W-2, don't forget to contact your state department of taxation to gather the correct documentation to support your tax statements. This process may take time, making it especially important not to wait until the tax deadline to complete.
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