Definition: Form W-2 is an annual report required by the IRS that an employer summaries the total wages, income tax withholdings, FICA tax withholdings, and state income taxes that were paid to an employee during the year. In other words, it’s an annual payroll report than an employer gives to each employee listing the details of his earnings for the year.
What is Form W2 Used For?
Chances are if you’re worked a job, you have received a W-2 from your employer in January following your year of employment. This is a standard form that the IRS requires all employers file and give a copy to all employees regardless of wages. Until like form 1099, form W-2 does not have a minimum payment limit. If an employer only pays its employ $2 for a job, it file a $2 W-2 with the IRS and give a copy to the employee.
The form W-2 lists the employee’s name, address, and social security number on the top left side of the form. The employer name, address, and employer ID number is usually listed directly underneath the employee’s information. To the right, there are several boxes that list the total wages, wages subject to social security taxes as well as medicare taxes—boxes 1, 3, 5, and 7.
The even boxes show the amount of taxes that were withheld by the employer during the year. Boxes 2, 4, and 6 show the federal income taxes, social security taxes, and medicare withholding, respectively.
Other information like dependent care costs and retirement investments are reported in boxes 10 through 14.
The bottom of the form W-2 is reserved for state tax purposes. State wages, tax withholdings, and city information is reported in boxes 15 through 20. Employees can use this form to prepare their individual income tax returns the following year.