U.S. taxes are a migraine for businesses and individuals alike, and there’s plenty of room for error. 1 in 5 business owners isn’t even sure of their tax rate.
Any negligence from the business can trickle down to their employees, who will also have a difficult time filing taxes if the business hasn’t done their due diligence.
To make sure you’re reporting taxes correctly to the IRS and proving your employees with correct information, you’ll need to make sure you’re successfully sending each copy of W2 forms.
Find out what a W2 form is, why it’s important, and what to do with your employees’ W2 copies.
What is a W2 Form?
W2 forms must be submitted to a business’ employees under the following conditions:
- The employee received at least $600 ore more for the year
- Income, social security, or Medicare tax was withheld from the employee’s pay
- Income tax would have been withheld if the employee did not claim exemption from withholding or claimed no more than one withholding allowance
W2 employees will have received a Form W-4 when they first started working for your business, which is their Employee’s Withholding Allowance Certificate.
Employees who fill out a form W-4 become a W2 employee, meaning employers are required to send them a copy of W-2 forms at the very beginning of tax season.
Differences Between the W4 Form and W2 Form
If you’re new in business or personally handling your accounting, it can be difficult to understand the separate W4 and W2 forms. To make it simple, your employees fill out the W4 while you fill out their W2 and send it to them.
The W2 form reports the employees’ net income for the year (including tips) as well as the amount of money that was withheld from their paychecks for income tax, social security, and Medicare. The W2 form must be given to your employees or sent in the mail to them every year by January 31. At the same time, you’ll also need to send an electronic copy of every W2 form directly to the IRS.
To fill out each W2 form, you may need to coordinate with your accounting team or payroll service. Most likely, all you’ll need to do is run a summary report for the year for each employee.
The form W-4 needs to be filled out by each employee during his or her first month of work. This form allows them to report the amount of federal taxes that will be coming out of each paycheck.
The withholding for each employee corresponds with specific tax allowances that are based on marital status and dependents. A single 25-yeard old worker will have a very different allowance from a married mother with four children.
What do Small Businesses Need to do with W2 Forms
During each January, this is when you’ll need to begin preparing W2 forms for each employee. You can’t begin this process until January 1 to make sure that your reporting includes all payments through December.
First, access a printable W2 form for 2019. With easy-to-use services, you can fill in your data directly online and then print the document for each employee. These services will also guide you through the process so you know exactly what information to record. Here’s a list of some of the most important items that go on your W2 copies:
- Employee ID number
- Business name
- Business address
- Tax ID number
- Employee SSN or tax ID
- Employee name
- Employee address
- Total wages (including tips)
- Social Security withholding
- Medicare withholding
How to Submit Each Copy of W2 Form
As you’re preparing copies of W2 forms for each employee, you should have 6 copies per employee:
- Copy A – Send to the Social Security Administration
- Copy 1 – Send to your state, city or local tax department (if applicable)
- Copy 2 – Employee use for reporting state, city or local taxes
- Copy B – Employee use for filing federal income tax return
- Copy C – Employee use for personal records
- Copy D – Employer use for business records
To send Copy A to the Social Security Administration, you can do so online at the SSA website, or by mail. If you’re submitting by mail, your forms will need to be postmarked by the January 31 deadline. Failure to submit your forms to the SSA on time could cause fines up to $260 per late form.
The deadline to send W2 copies to your employees is also January 31. You can either give your employees their forms directly to them at work or make sure they’re in the mail to them by the deadline.
If possible, it’s best to give your employees their forms earlier than the deadline so they can have the opportunity to review them throughout January if needed.
Failure to deliver your employees’ W2 forms to them on time allows them to pursue action with the IRS. The IRS will attempt to contact you and can issue any fines that apply.
Making Tax Season as Seamless as Possible
Understanding the full W2 process can make your tax season as seamless as possible. Knowing what you need ahead of time will prepare you for January when it’s important to be organized and timely.
To make sure the process works smoothly, be sure to check over each W2 form before you send it off its appropriate location. Double-check your payroll data with the information you’ve recorded on the form.
If you happen to make a mistake on any copy of W2 forms, you’ll need to access a form W-2c so you can resubmit to the SSA with the correct information. Keep in mind that the form W-2c is for most corrections except for missing employee names and social security numbers.
If you feel you’ve made a mistake and you’re not sure how to proceed, contact the SSA directly to make sure you’re proceeding correctly.
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