A Form W-2, officially known as the "Wage and Tax Statement," is a tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation. The form is also used to report FICA taxes to the Social Security Administration. Form W-2 includes wage and salary information as well as federal, state, and other taxes that were withheld. This information is used by the employee when they complete their individual tax return using Form 1040. The use of Form W-2 was established by the Current Tax Payment Act of 1943 as part of an effort to withhold income at the source. The first Form W-2s were issued to employees in 1944. In 1965, the forms name was changed from "Withholding Tax Statement" to "Wage and Tax Statement" (current name). In 1978, the forms appearance changed to its modern style of numbered boxes.
The Form W-2 provides important tax information from the employer related to earnings, tax withholding, benefits, and more. It reports the total wages for the year and the amount of federal, state, and other taxes withheld from the employees paycheck. It may also contain information about tips, contributions to retirement accounts, health savings accounts, health coverage premiums, and other relevant details. The form is typically sent by employers to employees by January 31st of each year and is used by employees to prepare their tax returns. The information on the W-2 determines whether employees are getting a tax refund or need to pay additional taxes at tax time.
The W-2 form is different from the 1099 form, which is sent to independent contractors, freelancers, and self-employed individuals. While the W-2 reports income earned as an employee and taxes withheld, the 1099 reports income earned as a non-employee and does not have taxes withheld.
The W-2 form contains various boxes that provide specific information, such as total taxable wages, federal income tax withheld, Social Security tax withheld, Medicare tax withheld, and other details related to benefits and taxes. Each box on the W-2 form corresponds to specific information that is relevant for tax reporting purposes.
