All U.S.-based businesses who hire employees must complete and file a Wage and Tax Statement, known as the W-2 Form, for each employee at the end of the year. The W-2 Form is filed with the Social Security Administration by employers on behalf of their employees. The Wage and Tax Statement is the only document that the Social Security Administration receives to determine Social Security benefits, so it is important that employers know how to accurately fill out and file W-2 Forms.
Before beginning to complete a Wage and Tax Statement, employers need to know the basic requirements to fill out the form. All entries on the form must be typed in black ink with a font size of 12 points. If possible, the font used should be Courier. Entries must not include dollar signs or commas, however, decimal points should be used for cents. If a figure does not include cents, zeros are to be typed in. The W-2 Form comprises six copies, with Copy A as the first copy, Copy A must not contain any errors, crossed out information, erasures or white-outs. If a mistake is made on Copy A, type an X in the “Void” box and continue onto the next W-2 Form, but do not indicate that it is a corrected W-2.
In box 1, type in the amount of the employee's wages and other compensation. However, do not include allowable deductions, such as retirement plan contributions that are made pre-taxed. Other compensation includes such things as tips, stipends, commissions, bonuses, vacation pay and any other miscellaneous payments made to the employee. In box 2, type in the total amount of federal taxes that have been withheld from the employee's paychecks for the entire year. Box 3 is for the total amount of wages that are taxed for Social Security benefits. This amount does not include tips, retirement contributions or some insurance premium contributions. The Social Security tax has an income cap of $106,800. This means that the maximum amount entered into box 3 is $106,800. Employees are not taxed for Social Security for any amount earned that exceeds $106,800. Box 4 is for the total amount of Social Security taxes that were withheld during the year. In box 5, enter the amount of total wages earned, including tips and commissions to be taxed for Medicare. In box 6, type in the total amount that has been withheld for Medicare taxes for the year. Box 7 is for tips and commissions that have been reported by the employee. When boxes 3 and 7 are added, the sum should not equal more than $97,500. In box 8, type in the total amount of tips for employees in the food and beverage industry. Leave box 9 blank. Box 10 is for the amount of employer-paid childcare or dependent care expenses. Box 11 is for retirement plan disbursements. Box 12 contains a letter code that corresponds to various employee benefits. Box 13 should be checked if the employee contributes to a retirement account, received sick pay via insurance payments or is a statutory employee who does not pay taxes. Use box 14 to indicate any other deductions that are not reported elsewhere. Box 15 is for the employer's state tax identification number, which may differ from the federal number. In box 16, enter the employee's wages that are subject to state income taxes. Box 17 is used for the amount of wages subject to local taxes. This box may be left blank in some cases. Box 19 is for any local taxes that have been withheld. In box 20, enter the code that corresponds to the taxation localities for boxes 18 and 19.