Form W-2
Form W-2, officially titled the Wage and Tax Statement, is a mandatory tax form in the United States used by employers to report an employee's annual wages, tips, other compensation, and withheld federal, state, local, and FICA taxes to both the employee and government agencies.[1] Employers issue it to employees from whom income, Social Security, or Medicare taxes were withheld, or who would have had income tax withheld if claiming no more than one withholding allowance.[1] The form details specific amounts in designated boxes, including taxable wages subject to federal income tax, Social Security wages up to the annual limit, Medicare wages without limit, withheld amounts for each, and allocations for tips or elective deferrals to retirement plans.[2] Employers must provide Copy B of Form W-2 to employees by January 31 of the year following the tax year, while filing Copy A with the Social Security Administration alongside Form W-3 by February 28 (or March 31 for electronic filings).[2] This reporting ensures accurate tax collection and credits Social Security earnings records.[3] Originating under the Current Tax Payment Act of 1943, which established payroll withholding to finance World War II and shift to pay-as-you-go taxation, Form W-2 formalized the documentation of withheld income taxes from wages.[4] Employees rely on Form W-2 data to file Form 1040 and claim withholding credits, making it foundational to individual income tax compliance.[1] Non-compliance by employers incurs penalties, underscoring its role in enforcing federal tax obligations.[2]Form Structure and Contents
Reported Data and Box Descriptions
Form W-2 reports employee wages, tips, other compensation, and associated tax withholdings through designated boxes, providing data for federal income tax, Social Security, Medicare, and state/local tax purposes. Employers must accurately complete these boxes based on payroll records, excluding certain pre-tax deductions from taxable amounts where applicable. The form includes identification fields (boxes a–f) and data boxes (1–20), with specific reporting rules to ensure compliance with Internal Revenue Service (IRS) and Social Security Administration (SSA) requirements.[5] Box 1: Wages, tips, other compensation. This box contains the total taxable wages, tips, and other compensation paid to the employee, including bonuses, taxable fringe benefits, and noncash payments, before certain elective deferrals and pre-tax deductions. Employers report amounts subject to federal income tax, ensuring consistency with Form 941 filings.[5] Box 2: Federal income tax withheld. Employers enter the total federal income tax withheld from the employee's wages throughout the year, including any excise tax on excess golden parachute payments. This figure represents amounts remitted to the IRS via payroll withholding.[5] Box 3: Social security wages. This reports total wages subject to Social Security tax, up to the annual wage base limit of $176,100 for 2025, including certain elective deferrals but excluding tips reported separately. Employers include taxable group-term life insurance over $50,000 and adjust for any prior-year corrections.[5] Box 4: Social security tax withheld. Employers report the total Social Security tax withheld from the employee, calculated at 6.2% of Box 3 amounts up to the wage base, plus any tax on tips, not exceeding $10,918.20 for 2025. This does not include employer portions.[5] Box 5: Medicare wages and tips. This box shows total wages and tips subject to Medicare tax, with no upper limit, including all compensation in Box 1 plus tips and certain deferrals. Employers must report amounts exceeding those in Box 3 if applicable.[5] Box 6: Medicare tax withheld. Employers enter the total Medicare tax withheld, at 1.45% of Box 5, plus any Additional Medicare Tax of 0.9% on wages over $200,000 for single filers. This reflects employee withholdings only.[5] Box 7: Social security tips. This contains tips reported by the employee to the employer, subject to Social Security tax, combined with Box 3 not to exceed the wage base. Employers report only employee-reported tips.[5] Box 8: Allocated tips. Employers in tip-allocating businesses, such as large food or beverage establishments, report tips allocated to the employee, which are not included in other wage boxes but are subject to tax.[5] Box 10: Dependent care benefits. This reports the total cost of employer-provided dependent care benefits, including any excess over the $5,000 exclusion limit, for use in Form 2441. Employers include fair market value of on-site facilities.[5] Box 11: Nonqualified plans. Distributions from nonqualified deferred compensation plans or nongovernmental section 457(b) plans are reported here for SSA record-keeping, separate from Boxes 3 or 5. Employers report only distributions, not deferrals.[5] Box 12: Codes for benefits and deferrals. Employers use letter codes (e.g., D for elective deferrals to 401(k plans, DD for health coverage cost under ACA) followed by dollar amounts to report items like retirement contributions, educational assistance, and adoption benefits. Up to four codes per W-2, with full list in IRS reference guide.[5] Box 13: Checkboxes. This includes checkboxes for statutory employee status (eligible for Schedule C), participation in a retirement plan (affecting IRA deductibility), and third-party sick pay (indicating non-employer payments). Employers check based on employee circumstances.[5] Box 14: Other. Employers may report miscellaneous items such as union dues, state disability insurance, or taxable fringe benefits not fitting elsewhere, with descriptive labels for clarity. This box is optional but useful for additional context.[5] Boxes 15–20: State and local information. Box 15 identifies the state and employer's state ID number; Box 16 reports state wages; Box 17 shows state income tax withheld. Boxes 18–20 handle local wages, taxes, and locality names, allowing reporting for up to two jurisdictions. Completion is required where state or local taxes apply.[5] Identification fields precede the data boxes: Box a for employee's Social Security number, Box b for employer's EIN, Box c for employer details, Box d for optional control number, and Boxes e–f for employee name and address, all entered exactly as on official documents to avoid processing errors.[5]Variations for Specific Employee Types
Statutory employees, defined under Internal Revenue Code section 3121(d)(3) as including certain agent drivers, commission drivers, full-time life insurance salespeople, home workers, and traveling salespeople meeting specific criteria, receive Form W-2 with Box 13 checked to indicate statutory employee status.[6] This designation treats them as employees for Federal Insurance Contributions Act (FICA) tax purposes, requiring employers to withhold and report Social Security and Medicare taxes, but allows the employees to deduct business expenses on Schedule C (Form 1040) as self-employed individuals for income tax purposes.[6] Unlike typical employees, statutory employees are not subject to income tax withholding unless they request it via Form W-4, though employers must still furnish the W-2 reflecting wages in Box 1.[7] Members of the clergy, such as ordained, commissioned, or licensed ministers performing ministerial services, are generally treated as employees for income tax withholding but may be considered self-employed for Social Security and Medicare taxes if they have not opted into the system via Form SS-8 or church election.[8] Employers report the minister's salary in Box 1 of Form W-2, but a designated housing or parsonage allowance—excludable from gross income for federal income tax up to the lesser of the designated amount, actual expenses, or fair rental value—is typically noted in Box 14 without inclusion in Box 1.[9] This allowance remains includible in net earnings from self-employment for purposes of self-employment tax calculation on Schedule SE, unless the minister is exempt from self-employment tax due to conscientious objection or similar status.[8] Churches may elect to withhold FICA taxes instead, in which case the W-2 reflects standard employee treatment without self-employment notations.[8] Nonresident alien employees, including those on F, J, M, or Q visas, receive Form W-2 for U.S.-source wages subject to withholding, but certain income may be exempt under tax treaties or specific provisions, such as up to $5,000 (as of 2025 limits) for student or trainee compensation under section 1441(b)(2).[10] Exempt wages are excluded from Box 1 (wages) but may appear in Boxes 3 and 5 (Social Security and Medicare wages) if applicable, with employers using Box 12 code "AA" to denote treaty-exempt amounts or other adjustments.[11] For nonresident aliens engaged in substantial U.S. employment, full wages are reported in Box 1 with standard withholding, though they file Form 1040-NR rather than Form 1040; employers must apply graduated withholding rates unless a central withholding agreement via Form 8233 is in place for exempt portions.[10] Military personnel receive Form W-2 from the Department of Defense or applicable branch, with nontaxable combat zone pay—earned during qualified hazardous duty in designated combat zones like those certified under Executive Order—excluded from Box 1 but reported in Box 12 using code Q to indicate the amount for potential use in credits like the Earned Income Tax Credit.[5] This exclusion applies to active duty pay for any month with at least one day in the combat zone, per section 112, but such pay remains subject to FICA taxes and is included in Boxes 3 and 5; hostile fire or imminent danger pay follows similar rules unless specifically excludable.[12] Employers (military branches) do not withhold income tax on excluded combat pay, though reservists or National Guard members may see prorated inclusions based on duty days.[12]Employer Obligations
Preparation and Accuracy Requirements
Employers are required to prepare Form W-2 for each employee from whom federal income tax, social security tax, or Medicare tax was withheld, or who was paid wages of $600 or more during the calendar year, regardless of withholding amounts.[2] Preparation must occur on a calendar-year basis, reporting all relevant compensation, tips, and withheld taxes for the prior year.[5] Forms must be completed using black ink in 12-point Courier font on single-sided paper, omitting dollar signs, commas, or decimal points in monetary boxes while including cents as two digits.[2] Key data elements include Box 1 for total wages, tips, and other compensation (such as bonuses, fringe benefits, and noncash payments); Box 2 for federal income tax withheld; Boxes 3 and 5 for social security and Medicare wages subject to those taxes, respectively; and Boxes 4 and 6 for the corresponding taxes withheld, capped at the 2025 social security wage base of $176,100.[5] Box 7 reports social security tips, Box 10 dependent care benefits, Box 11 nonqualified plan distributions, and Box 12 uses alphanumeric codes for items like elective deferrals (Code D), health savings account contributions (Code W), or employer-sponsored health coverage costs (Code DD).[2] Box 13 checkboxes indicate statutory employee status, retirement plan participation, or third-party sick pay, while Boxes a, b, c, e, and f capture employee social security number, employer EIN, and addresses.[5] Multiple Forms W-2 may be issued per employee if exceeding four Box 12 entries or for separate reporting of distinct compensation types.[2] To ensure accuracy, employers must verify employee social security numbers and employer EINs against records, as mismatches trigger Social Security Administration rejections.[2] Reported amounts in Boxes 1 through 7 must reconcile with totals from quarterly Forms 941, 943, or 944, and Medicare wages in Box 5 should equal or exceed social security wages in Box 3.[5] Common errors to avoid include incorrect Box 12 codes (e.g., misusing Code D for non-401(k) deferrals), light or faded printing, or failing to report all taxable fringe benefits like group-term life insurance over $50,000.[2] Employers bear responsibility for correcting payroll records if employee data like names or SSNs is inaccurate, and VOID marking applies only to spoiled forms not distributed.[5] Inaccurate or incomplete preparation incurs civil penalties of $60 to $340 per form for failures to file correct information timely, escalating to $680 per form after August 1 notices, with maximums of $1,296,000 or $4,098,500 annually depending on employer size; intentional disregard raises penalties without upper limit.[2] Reasonable cause, such as events beyond control, may waive penalties, but de minimis errors under $100 aggregate or 10% of totals qualify for relief if corrected within 30 days.[5] Special rules apply for certain employees, such as clergy exempt from social security or H-2A workers requiring additional Box 13 notations, demanding precise verification to prevent underreporting.[2]Distribution to Employees and Filing with Agencies
Employers are required to furnish Copies B, C, and 2 of Form W-2 to each employee by January 31 of the year following the calendar year to which the wages relate.[13] This deadline applies regardless of whether the employee requests the form, ensuring employees receive documentation of wages, tips, and withheld taxes for their federal, state, and local tax filings.[14] Failure to meet this date constitutes noncompliance, though the requirement is satisfied if the forms are properly addressed, mailed, or electronically delivered by the deadline.[2] Electronic distribution of Form W-2 to employees is permitted if the employer and employee consent in a manner that demonstrates affirmative agreement, such as through electronic systems allowing access and retention of the statement.[15] Employers must retain records of this consent for at least three years and provide instructions for accessing the electronic form.[2] Paper distribution remains an option, particularly for employees without reliable electronic access, and multi-copy form packets are available from the IRS to facilitate compliance.[13] For filing with federal agencies, employers must submit Copy A of all Forms W-2 to the Social Security Administration (SSA) accompanied by Form W-3, Transmittal of Wage and Tax Statements, by January 31.[16] If the due date falls on a weekend or holiday, it shifts to the next business day, as with the February 2, 2026, deadline for 2025 forms.[2] The SSA uses this data to verify Social Security and Medicare contributions, and discrepancies can trigger notices to employers or employees.[13] Electronic filing is mandatory for employers submitting 10 or more information returns, including Forms W-2, during the calendar year, unless a waiver is obtained from the IRS.[13] The SSA's Business Services Online (BSO) portal supports e-filing, which must not be duplicated with paper submissions to avoid processing errors.[2] This requirement, effective since tax year 2023 expansions, aims to reduce errors and expedite data processing, with paper filing reserved for smaller filers.[17] Many states require employers to file copies of Form W-2 with state tax agencies for income tax withholding verification, often aligning with federal deadlines but varying by jurisdiction—some mandate electronic submission by March 31 or require separate state-specific forms.[18] Employers should consult state revenue departments for precise obligations, as non-compliance can result in state-level penalties independent of federal rules.[19]Employee Applications
Integration with Individual Tax Returns
Employees receive Form W-2 from their employers by January 31 of the year following the tax year, enabling them to report wage and withholding data on their individual federal income tax return, Form 1040 or 1040-SR.[2] The primary integration occurs through transferring amounts from specific boxes on the W-2 to corresponding lines on Form 1040: Box 1 (wages, tips, other compensation) populates line 1a (total wages, salaries, tips, etc.), Box 2 (federal income tax withheld) is reported on line 25a (federal income tax withheld from Forms W-2 and 1099), Box 4 (Social Security tax withheld) and Box 6 (Medicare tax withheld) support verification of FICA contributions though not directly entered as payments on Form 1040, and state-specific data in Boxes 15-17 informs state returns.[20] [21] For taxpayers with multiple W-2 forms, amounts from Box 1 across all forms are aggregated and entered as a single total on line 1a of Form 1040, ensuring comprehensive reporting of taxable wages after adjustments like pre-tax deductions for retirement contributions or health insurance.[20] Federal withholdings from Box 2 are summed similarly for line 25a, directly reducing the taxpayer's overall tax liability or increasing refund eligibility when compared against computed tax on line 16.[20] Discrepancies between W-2-reported figures and taxpayer entries can trigger IRS matching programs, as the agency cross-references W-2 data submitted by employers against individual returns to detect underreporting.[22] In electronic filing, W-2 data is often imported directly from employer or payroll systems into tax software, streamlining integration without physical attachment, while paper filers must staple Copy B of the W-2 to the front of Form 1040; corrected W-2c forms require attaching both original and corrected copies if applicable.[20] This process allows the IRS to credit withholdings against tax owed, with overwithholding typically resulting in refunds issued within 21 days of e-filing acceptance, though underwithholding may necessitate additional payments to avoid penalties under IRC Section 6654.[20] State and local tax integration follows analogous mappings from W-2 Boxes 15-20 to respective state forms, varying by jurisdiction but reliant on federal W-2 accuracy.[1]Handling of Tip Income and Adjustments
Employees report tip income from Form W-2 by including the amount in Box 1 (wages, tips, and other compensation), which encompasses tips reported to the employer, on line 1 of Form 1040 or Form 1040-SR.[23] Any tips not reported to the employer, such as those totaling less than $20 per month, must be added to the Box 1 amount when computing total wages for income tax purposes.[23] Allocated tips, reported separately in Box 8 of Form W-2 by employers in certain industries like food and beverage services where actual tips fall below required thresholds (as determined via Form 8027), are not included in Boxes 1, 3, 5, or 7 but must be treated as additional income on the employee's tax return.[2] [23] Employees who believe the allocated amount exceeds their actual receipts, based on personal records, report the lower figure as income and use Form 4137 to compute adjusted social security and Medicare taxes on the difference.[23] Uncollected social security tax on tips appears in Box 12 with code A, and uncollected Medicare tax on tips with code B; these amounts represent employer-reported shortfalls in withholding, which employees must account for by paying the taxes directly via their return.[2] For unreported tips or disputed allocations, employees complete Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to calculate owed taxes at the applicable rates (6.2% for social security up to the wage base of $176,100 for 2025, and 1.45% for Medicare), attaching it to Form 1040 and entering the total tax on Schedule 2, line 13.[24] [23] If the additional Medicare tax of 0.9% applies (for combined wages over $200,000 single filer threshold), Form 8959 is used in conjunction.[23] Form 4137 also facilitates adjustments for tips reported in Box 7 (social security tips), ensuring compliance with social security wage limits by reconciling reported amounts against actual receipts.[2] Employees cannot reduce income tax liability solely through these adjustments, as all tips remain taxable income regardless of reporting status to the employer.[23]Compliance Procedures
Deadlines and Electronic Filing Options
Employers must furnish Copy B of Form W-2 to employees by January 31 of the year following the calendar year in which wages were paid, or the next business day if January 31 falls on a Saturday, Sunday, or legal holiday.[2] [25] This deadline applies regardless of whether the employee requests electronic delivery, provided the employee has consented to it in a manner that meets IRS requirements, such as affirmative consent and the ability to request paper copies free of charge.[2] The deadline for employers to file Forms W-2 with the Social Security Administration (SSA) is also January 31, or the next business day if it falls on a non-business day, accompanied by Form W-3 as a transmittal summary for paper filings.[26] [2] For tax year 2024 filings due in 2025, this date was January 31, 2025.[16] Extensions for filing with the SSA are not available, though reasonable cause relief may be requested for late filings.[2] Electronic filing of Forms W-2 is mandatory for employers required to file 10 or more information returns during the calendar year, including W-2s, unless a waiver is granted by the IRS due to undue hardship.[13] The SSA provides free electronic filing options through its Business Services Online (BSO) portal, including the W-2 Online tool for direct data entry and file uploads in approved formats.[3] [27] Employers may also use SSA-approved software from third-party vendors or service providers to generate and transmit electronic files compatible with SSA systems.[3] When filing electronically with the SSA, a separate Form W-3 is not required, as the electronic transmission serves as the transmittal.[13] Electronic submissions must include all required data elements, such as employer identification numbers and wage details, and are processed faster than paper filings, reducing error risks through validation checks.[28] State revenue agencies may have separate electronic filing mandates and deadlines, often aligning with federal requirements but varying by jurisdiction.[29]Error Correction via Form W-2c
Form W-2c, titled Corrected Wage and Tax Statement, enables employers to rectify errors in data previously submitted via Form W-2, W-2AS, W-2CM, W-2GU, W-2VI, or prior W-2c filings to the Social Security Administration (SSA).[30] Such corrections ensure accurate maintenance of SSA earnings records, which influence employee eligibility for Social Security benefits, Medicare, and unemployment compensation, as well as federal tax withholding computations.[31] Employers must initiate corrections upon discovery of discrepancies, including but not limited to incorrect employee names, Social Security numbers (SSNs), employer identification numbers (EINs), wages subject to Social Security or Medicare taxes, allocated tips, federal income tax withheld, or codes in boxes for retirement plan contributions, deferred compensation, or statutory employee status.[31] Non-substantive errors, such as minor address inaccuracies not impacting tax or benefit calculations, generally do not require Form W-2c. If the error also affects quarterly Form 941 filings, employers must separately submit Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, to the IRS.[31] To file, employers prepare one or more Forms W-2c detailing the originally reported and corrected amounts, marking the "Previously reported" and "Correct information" columns accordingly; unchanged items receive a "C" code and the original value repeated.[32] A Form W-3c transmittal summarizes the corrections, with separate transmittals required for each tax year amended.[31] Submissions occur via mail to the SSA or electronically through approved systems like the SSA's Business Services Online, mandatory for corrections involving 10 or more Forms W-2c in a calendar year unless a waiver is granted for hardship via Form 8508.[31] Employers must furnish a copy of the corrected Form W-2c to the affected employee without undue delay, typically alongside any necessary adjustments to the employee's tax records.[31] While no statutory deadline governs Form W-2c filings beyond the general imperative for timeliness, the SSA advises submission "as soon as possible" post-discovery to prevent accrual of penalties under Internal Revenue Code Section 6721 for intentional disregard of filing requirements or failure to provide correct statements, which can reach $310 per form for small businesses in 2025, escalating for larger entities or repeated violations.[31] Corrections for prior years remain feasible, though SSA records limit retroactive adjustments typically to three years for wage data impacting benefits.[31] Failure to correct propagates errors into employee tax returns and SSA databases, potentially triggering IRS notices or benefit denials.Penalties and Enforcement
Civil Penalties for Late or Inaccurate Reporting
Civil penalties for late or inaccurate reporting of Form W-2 are imposed under Internal Revenue Code (IRC) sections 6721 and 6722. Section 6721 applies to failures to file correct information returns, such as transmitting W-2 data to the Social Security Administration (SSA) via Form W-3 by the due date of January 31. Section 6722 applies to failures to furnish correct payee statements, such as providing Copy B of Form W-2 to employees by the same deadline. These penalties are assessed per form and are separate for filing and furnishing failures, even if both occur for the same W-2.[33][2] Penalties are tiered based on the degree of lateness in correcting the failure, with amounts adjusted annually for inflation. For information returns required to be filed or statements furnished in calendar year 2025, the base penalties per W-2 are as follows:| Tier | Description | Penalty per W-2 (Small Businesses) | Penalty per W-2 (Large Businesses) |
|---|---|---|---|
| 1 | Corrected within 30 days after due date (or by February 28/March 2 for January 31 due date) | $60 | $60 |
| 2 | Corrected after 30 days but by August 1 | $130 | $130 |
| 3 | Corrected after August 1 or not corrected | $330 | $330 |