What Are The Rules for W-2s

Perhaps no other form is as misunderstood as the lowly W-2.  “Expert” employees attempt to lecture managers every year about what can and cannot be done with a W-2 and each year, our team in the office fields scores of calls with taxpayers asking questions.

Here’s the deal: At the end of every tax year, any company that engages in commerce, trade or business and pays employee wages must report these employee earnings to the Internal Revenue Service. The employer transmits W-2s along with the summarized form W-3 to the IRS by a specific date each year.

As a result of these actions, employers must provide their employees with W-2 forms, showing the amount of wages and other money paid to the employer for the year and the taxes withheld from these payments no later than January 31. It’s important to note that the IRS considers the act of mailing W-2s by January 31 to be appropriate and legal – whether the employee has received it or not.

Since the W-2 is an official form of the IRS, it isn’t negotiable.  (another reason that employees can see YTD data on paychecks – to allow them to monitor this data).  Any employee who has income tax, Medicare and Social Security withheld, or who would have taxes withheld if the employee had not claimed “exempt” or no more than one withholding allowance on Form W-4, must also receive a W-2.  At the same time, employees will receive multiple copies of the W-2 to assist and reconcile Federal, State, and Local taxes for the year – as well as to retain that information for future reference.

What is interesting is that while employees are required to have their W-2 forms in hand by the end of the month of January, the IRS doesn’t require employers to have sent in those duplicate records until April – again, the result of better systems and software for the purpose of managing the millions of pieces of data about work, workers, and the economy of the United States.

A question we are often asked is why W-2s only consider an employee’s social security number (SSN) if that employee also has an independent tax identification number (ITIN).  Simple!  Every legally authorized employee has a social security number, so the system is set up to effectively manage the millions of wage earners in the revenue system – The IRS uses the SSN to ensure that payments reported agree with the amounts shown on employee tax returns. Additionally, the Social Security Administration uses the employee SSN to record employee earnings for future SSA and Medicare benefits.

With the rise of software to instantly verify an employee’s work eligibility (E-Verify), once again, the Social Security number reigns supreme for keeping track of who has done what, who is qualified to work, and how that individual has been paid throughout the year.


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