If you work as an employee for one or more companies, you’ve likely heard about W2 forms when it comes time to file your taxes. However, you may not know exactly what the document contains if you’re new to working or filing taxes.
Employers fill out W2 forms for all employees early during the year and have these documents sent to workers as well as to the IRS. Depending on the company, you may receive yours through the mail or through your company’s website.
But what is a W2 form, and why is the document so important? Read on to learn the basics.
So, What Is a W2 Form Exactly?
Basically, a W2 form is a tax document that contains important information about both you and your employer. Usually, your company will send make the document in December and send it to you in January of the next year.
This document reports all your earnings for the year including your base wages and any tips received. It also breaks down the taxes that your employer has taken out of your income at the federal, state, and local levels.
What Does a W2 Contain?
When you look at an employee W2 form, you’ll see basic information like your name, Social Security number, and address along with your employer’s name, address, and tax ID number.
Wages get broken down into categories such as those subject to Social Security and Medicare taxes. Your taxes are broken down into federal, Social Security, Medicare, state, and local taxes.
The W2 form also includes information about other items like retirement plans, sick pay, dependent care benefits, and health insurance premiums. You can find the best W2 generator to see exactly what goes on this document.
When Would You Need a W2 Form?
You’ll definitely need your W2 form when you go to file your taxes since the tax filing software or tax preparer will need the income, tax, and benefits information to complete your return.
However, you may need this document for other purposes regarding income verification. For example, if you apply for a home or car loan, the lender may want to verify your earnings with a W2 form. Organizations offering assistance programs like food stamps, Medicaid, and subsidized housing ask for W2 forms often to make sure you don’t exceed their income limits.
Even when you don’t have to present the W2 form, the information still remains helpful. For example, knowing last year’s income can help you plan your budget for the current year. You can also spot tax withholding issues you may need to resolve with your employer.
Get Your W2 Form If Needed
You’ve learned the answer to the question, “What is a W2 form?” So, now you should obtain the document if you need it.
If you don’t get a W2 form around tax time, contact your employer first. If that doesn’t work, you can reach out to the IRS for help.
When you’re dealing with a lost W2 form from the past, you may be able to download it from your employee portal. Further, the IRS can provide a transcript as a substitute too.
For more tax tips, go check out our other posts.