What’s The Rule on 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 mailing of 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 you can see your YTD data on paychecks – to allow you 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” must also receive a W-2.

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.

What’s important to remember is this:  Your employer is not legally bound to place your W2 in your hands before the end of January, and those tax services who offer “early return preparation” using W2 data can’t guarantee the data.  My advice is to make sure your paychecks are accurate with respect to tax information, but the most accurate returns are always going to be prepared from W2 data. 

Make it a great day!


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