January is speeding by and you realize it’s nearly halfway through the month when that big question starts looming. Pretty soon, everyone will be seeking your immediate answer. You may think to yourself “Didn’t we JUST ring in the new year?” Yes, there’s one thing you can count on, everyone on your staff excited about an anticipated refund wants their W-2 FAST.
It’s time to get that important task off your plate and it’s best to start ASAP.
The W-2 is required to be filed to show the state and federal government how much your employees earned and paid in taxes for the year. No matter how much you want to delay the act of preparing these W-2s, the Internal Revenue Service (IRS) has already made the decision for you. All W-2s have to be issued or mailed by January 31 to avoid a penalty.
Tip: Remember not everyone is an employee. If you had independent contractors or contracted individuals that you paid more than $600 within that particular calendar year, you are required to issue Form 1099-MISC detailing the amount of their nonemployee compensation.
You got this? Great!
Need to know how to prepare Form W-2? Keep reading.
For each W-2 you prepare, you will need to include information:
- Control Number (You create this internally to decipher your employees and this is optional)
- Your Company Information (Federal Employer ID#, Business name & address)
- Total wages, tips, and other compensation for each employee. Enter in Box 1.
- Total amount of withholding for each employee for previous year (Box 2)
- Total Social Security wages (up to the Social Security maximum)(Box 3)
- Total Social Security Tax Withheld (Box 4)
- Total Medicare wages and tips (same as total wages)(Box 5)
- Medicare tax withheld (Box 6)
- Social Security tips (Box 7) and allocated tips(Box 8)
- If you 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 is for amounts for other compensation or reporting, to enter into 1-4 boxes. Click here for the codes for
- 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
- Contributions to medical savings accounts or health savings accounts
- Cost of employer-sponsored health coverage, using Code DD, according to the reporting requirements of the Affordable Care Act
- Box 14 – Other deductions or compensation that must be disclosed to employees for their tax returns. For example
- After-tax pension
- Auto reimbursements
- 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 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)
Don’t forget to check for accuracy! You can verify employee’s social security number through the Social Security Administration and IRS.
Lastly distribute the W-2s to the following:
- To the Employee: Copies B, C, 1, and 2
- To the Social Security Administration – Copy A. The SSA requires that you send Copy A from each employee’s W-2, along with Form W-3, by the end of February.
- Keep Copy D for your records.
If reading this makes your head hurt, contact us today. We will be happy to prepare your W-2s and we will even bring aspirin!