Wage and Tax Statement, Form W-2 reports income, Social Security, and Medicare taxes withheld from the employee’s salary. It also reports wage, salary, and other compensation paid to the employee. The employee will then use Form W-2 to file a federal income tax return.
Because of this, employees count on their W-2 to file a tax return. With that said, employers must file and furnish employees with their Wage and Tax Statement until January 31st. If filed late, the employer will be subject to a $50 initial penalty for the first 30 days. After the 30 days to August 1st, the penalty will be $100 per W-2 filed late.
Even before filing a tax return, all the information regards to the employee’s income and tax can be seen on Form W-2. This gives an initial idea to the employee whether he or she is going to receive a tax refund or not. Along with the federal income tax withheld, the employee will be able to know the amount of Social Security and Medicare tax withheld.
On Form W-2, you can see the taxes withheld on the following boxes.
Box 2: Federal income tax withheld
Box 4: Social Security tax withheld
Box 6: Medicare tax withheld
Box 17: State income tax withheld
Box 19: Local income tax withheld
What is taxes withheld?
The federal law requires employees to pay for their federal income tax gradually during the course of the tax year. The employer takes a portion of the employee’s salary and forwards it to the IRS. This is how employees pay for their federal income tax or at least a part of it. This is known as the tax withholding.
If the taxes withheld throughout the tax year is more than what the employee owes, the IRS will send a tax refund. This is the sole reason why we have such a thing as tax refunds. Use Form W-4 to let your employer know how much tax needs to be withheld from your salary.