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Everything you need to know about the W-2 tax form

You will need all your financial documents while filing for tax returns, and the W-2 tax form is an indispensable part of these documents. The Internal Revenue Service demands (IRS) for every employer to report the wage and salary information on the form W-2, which is sent to the employee and the IRS at the end of the year. The W-2 tax form consists of information about the employee’s wages and the amount of federal, state, and other taxes that are withheld from the employee’s paycheck.

Everything you need to know about the W-2 tax form

It is imperative for every employer who is engaged in any trade or business, and who pays remuneration which includes noncash payments of $600 or more for the entire year, to send the W-2 tax form to the employee. The W-2 tax form also includes other incomes, social security, or Medicare tax that was withheld for every employee in the company, and the employer has to send the form to them and the IRS before January 31 st , following the close of the tax year, which is December 31 st .

As mentioned earlier, the W-2 tax forms are sent to the employees by the employer, and by employees, it indicates the ones who are paid a salary or other form of compensation. It does not include those people who were hired on contract or are self-employed workers. However, such employees receive their earning statements on a form 1099 rather than the W-2 tax forms. Traditionally, the W-2 tax forms were filled out on paper, and people used to consult their tax specialists to ensure that everything is correct and that they are availing of the highest possible deductions. However, these days certain websites allow people to electronically file their taxes without the need to consult an accountant.

The components of the W-2 tax form
If you have worked in any firm, you might have been issued a W-2 tax form at some point in your life. The W-2 tax forms are the same for every employer and are divided into state and federal sections since it is imperative for employees to file taxes on both levels. The components of the W-2 tax form consists of fields that contain the employer’s information, and that includes the company’s Employer Identification Number (EIN) (federal) and the Employer’s State ID Number. The remaining field will consist of the employee’s income from the previous year. It is essential to know that the W-2 tax forms have fields that display all types of income, and there is a box that shows the total amount of money the employee made from that particular employer in the year in question, and this is the same for federal and state. The other fields on the W-2 tax forms depict the amount of taxes that are withheld from an employee’s paychecks, and the federal income tax, Social Security wages, Social Security tax, and others are mentioned separately. In addition to this income information, there are other fields where the money the employee received in tips is reported for the particular year.

To be precise, the W-2 tax forms give minute details of all your income and the different taxes that were withheld from your paycheck.

The importance of tax withholding
It is common knowledge that the IRS requires every individual to make timely payments throughout the year, and in such cases, it is your employer who does this for you. When your employer withholds amounts from your paycheck for the federal income taxes, you must know that these amounts are sent to the IRS throughout the year. When you are preparing taxes or calculating your tax for the year, the amounts displayed on the W-2 tax forms as reported by your employer has to be deducted from your entire tax bill. When you undertake this calculation, you will know whether you have to expect a refund or make an additional tax payment. This procedure has to be repeated in case you are paying your state income taxes.

The importance of verifying your name and Social Security Number
It is crucial that every detail you provide is correct since the identifying information section of the W-2 tax form functions as a tracking feature. In case the information you report on your taxes doesn’t match the information provided by the employer on your W-2 tax form, the IRS will inquire into the matter. Moreover, the IRS will match the amount reported by you to the employer’s corporate tax return for accurate results.

Ignoring your W-2 tax form isn’t the right thing to do since the IRS already has a copy of your W-2 tax form and knows how much tax you owe the state or the federal government, and can contact you in case you fail to file a tax return.

There are chances that your employer might have made a mistake regarding your Social Security number or the amount withheld, in such cases, you need to report the mistake to the employer. In such cases where the amount withheld is erroneous, the employer is fined by the IRS.

Filing your tax returns
Note that while you file your tax return, attach a copy of your W-2 tax form to it. If you decide to file your tax return by mail, you need to place a copy on the front of your return.

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