It is that the season for W-2s and 1099s and if you’re unaware of those two crucial forms then this blog is the perfect place to be. While we’ve delved into 1099 in our previous blog this one right here is an information guide for W-2 then without further ado let’s jump right-in:
What is Form W-2?
A W-2 form is a politician Wage and tax statement that’s furnished by an employer to both IRS and employee detailing the employee’s gross annual wages, Social Security and Medicare earning including the state and federal taxes withheld from the earnings.
Let us make it simpler: Every employer withholds state and federal taxes from an employee’s pay check Online Bookkeeping Services in New York. And at the beginning of each year, the employer has got to inform what proportion a specific employee has earned during a year and the way much was paid in taxes, to the federal , government and therefore the employee himself.
Who files the shape W-2?
Every employer engaged in business or trade who pays the worker remuneration of quite $600 or more for the year must file the shape W-2 for every employee. IRS does make a distinction between contractors and employees. It’s up to the business to work out who the respective designation supported their services.
The W-2 must be filed and copies are to be sent to the workers before the top of January (or any date mentioned, for instance, if an employer is reporting the income of the year 2020, the W-2 form must be prepared and issued to the IRS, Social Security Administration and therefore the employee before the maturity in January 31st.
What information does a W-2 include?
As said above the W-2 form includes separate sections for federal and state sections, details of the employer – EIN (Employer’s Identification Number) & Employers state ID number. All other fields are dedicated to scribe earnings for the year from the employer alongside tax amount withheld; separate fields for money earned from different means also exist. (Tips for example). All the small print of tax withholdings are noted and are deducted from the individual’s tax obligation during his tax filing.
Given the employer sends out the copies of the W-2 for both IRS and employees, the earning and tax details, the IRS makes use of this to trace the income and liabilities of the worker. Just in case of any discrepancy, the IRS may audit the employee/taxpayer. If the tax withholding exceeds the tax amount owed by the workers to the IRS, he/she may receive it within the sort of refund. To make sure most are one an equivalent page, the W-2 contains multiple parts which are sent to all or any the parties involved, government, state & federal and employee.
What are the parts of Form W-2?
The W-2 may be a multipart form that contains 6 forms which are slated for various destinations themselves, namely – Copy A, Copy B, Copy C, Copy D, and replica 1 & Copy 2.
An employee receives three copies, Copy B, C & 2. While Copy B is attached to the federal tax return just in case of mailing. As for e-filing, Copy B has got to be attached to other documents for a minimum of 4 years; an equivalent goes with Copy C which is that the official copy of the taxpayer. Copy 2 is for the state income tax return and like Copy B, it must be kept with the tax documents for a minimum of 4 years.
The other three sorts of W-2 are the responsibility of the employer, Copy A is shipped to the Social Security administration, Copy 1 to the state, city or locality and replica D is for the employer’s records. Yes, there’s getting to be an entire lot of paperwork for the employers when it involves W-2. From preparation of the forms (six of them for every employee), and mailing them additionally to all or any other critical tasks and administrative headaches during the tax season are often cumbersome and time-consuming. And this is often where remote firm like Kayabooks comes into the image. In addition to providing full-scale remote accounting services and tax preparation Online Accounting Services, we’ve also been offering 1099 and W-2 preparation services for all kinds of companies for years now. From procuring the forms to buying supplies, producing and printing the copies, reviewing, mailing and filing directly with IRS, the entire process are going to be accurately and efficiently performed by our team saving you’re your valuable money, time and resources within the process during this tax season for you.