Filing W-2 forms is an important part of every small business owner's year-end tax responsibilities. These documents provide a detailed record of employee earnings and tax withholdings, ensuring compliance with IRS regulations and equipping employees with the information they need to file their income taxes.

While the process of creating and distributing W-2s may seem straightforward, accuracy is essential to avoid penalties, employee confusion, or delays. Whether you're assembling W-2s for the first time or looking to simplify the process, understanding their purpose and the steps involved can make tax season far less stressful.

This article will cover everything you need to know about W-2s, including their purpose, filing deadlines, and how to complete them accurately. Follow along to avoid common pitfalls and file with confidence.

What Is a W-2?

Before we go any further, let’s quickly define W-2s and identify their purpose.

The W-2 form, officially known as the “Wage and Tax Statement,” is a tax document used by employers to report an employee’s annual earnings and the taxes withheld from those earnings. Simply put, it provides a summary of how much an employee was paid and how much his or her employer has already sent to the IRS for income, Social Security, and Medicare taxes.

A W-2 helps employees file their income tax returns by clearly breaking down their wages and tax payments. For employers, a W-2 ensures compliance with IRS regulations and reporting requirements, including filing copies of the W-2 with the Social Security Administration (SSA). In addition to being sent to employees, employers must also submit the W-2 to the SSA and, in some cases, state tax agencies. Corrections can be made later using Form W-2c if errors occur.

Who Needs a W-2?

Not everyone receives a W-2. This form is specifically for employees who earn wages through an employer-employee relationship. Independent contractors and freelancers don’t get a W-2; instead, their earnings are reported on a 1099 Form.

Employers must issue W-2s to any employee who:

• Earned $600 or more during the tax year, or
• Had any federal income, Social Security, or Medicare taxes withheld, even if his or her total income was less than $600.

These forms must be sent to employees and filed with the IRS by Jan. 31 each year.

W-2 vs. W-4: What’s the Difference?

It’s easy to confuse W-2s with W-4s, but they serve very different purposes. A W-4 Form is completed by employees when they start a new job or update their tax withholding preferences. This form tells employers how much tax to withhold from each paycheck. A W-2 Form is completed by employers at the end of the year to summarize an employee’s total wages and taxes withheld. Think of the W-4 as a setup tool for withholding and the W-2 as the annual report that shows how it all played out. 

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How to Fill Out a W-2

Filling out a W-2 form is fairly self-explanatory, given you have some basic information about your business, including its employer identification number (EIN), state ID number, etc. Perhaps the main challenge to filling out the form correctly is to avoid errors when entering names and numbers in the fields. Always double-check the boxes to make sure you haven’t entered the wrong figures or misspelled any employees' names or addresses.

Through the next section, we’ll provide you with a detailed breakdown of a W-2’s individual fields. If you have any specific questions, we suggest you access IRS Publication 15, the “Employer’s Tax Guide,” which is largely recognized as the go-to resource when it comes to filling out a W-2.

Boxes A-F: Basic Information

Boxes A-F capture essential details about the employer and employee.

• Box A: Enter the employee’s nine-digit Social Security number in the XXX-XX-XXXX format. If an employee is awaiting his or her Social Security card, write "Applied For."
• Box B: Provide your nine-digit EIN in the XX-XXXXXXX format. This number is unique to your business.
• Box C: Include your company's legal name, address, and ZIP code. Use the business's legal address, even if it differs from the employee's work location.
• Box D: Control numbers, used for internal record-keeping, are optional. Leave this box blank if your company does not use them.
• Boxes E & F: List the employee’s full name (first, middle initial, and last) and current address. Double-check that the spelling on the form matches each employee’s Social Security records.

Boxes 1-6: Taxable Wages and Federal Taxes

These boxes calculate and report federal taxable income, Social Security wages, and Medicare wages.

• Box 1: Record wages, tips, and other taxable compensation subject to federal income tax. Exclude pre-tax deductions, like retirement contributions or health premiums.
• Box 2: Enter the total federal income tax withheld from the employee’s pay during the year.
• Box 3: Report wages subject to Social Security tax, capped at the annual wage base (e.g., $176,100 for 2025).
• Box 4: Indicate the amount of Social Security tax withheld (6.2% of wages, up to the wage base).
• Box 5: Include all wages subject to Medicare tax. Unlike Social Security, there is no cap for Medicare wages.
• Box 6: Specify Medicare tax withheld (1.45% of wages) and add an additional 0.9% for employees earning over $200,000.

Boxes 7-14: Additional Tax Information

Boxes 7-14 address specific earnings or deductions, such as tips, dependent care benefits, and special contributions.

• Box 7: Report tips subject to Social Security tax. The total of Boxes 3 and 7 should not exceed the Social Security wage base.
• Box 8: Enter allocated tips, which are not included in Boxes 1, 3, or 5, here.
• Box 10: Record dependent care benefits provided by your company. Amounts over $5,000 are taxable.
• Box 11: Document distributions from nonqualified deferred compensation plans.
• Box 12: Use specific codes to detail additional employee compensation [e.g., Code D for 401(k) contributions].
• Box 13: Check applicable boxes to identify statutory employees, retirement plan participation, or third-party sick pay.
• Box 14: Include other payments or deductions, such as state disability insurance or vehicle lease payments.

Boxes 15-20: State and Local Tax Details

These boxes focus on wages and taxes subject to state and local regulations.

• Box 15: Enter your state EIN and use your state’s two-letter abbreviation.
• Box 16: Report wages subject to state income tax. This may differ from Box 1 depending on your state’s unique tax laws.
• Box 17: Indicate the total state income tax withheld from the employee’s wages.
• Box 18: Provide wages subject to local income tax, if applicable.
• Box 19: Enter the amount of local income tax withheld.
• Box 20: Specify the locality name, such as the city or municipality, if local taxes apply.

How to File a W-2 Form

The number of copies sent out, the date they must be sent/received, and when they’re returned are all regulated by the U.S. government. 

Number of W-2s Needed for Multiple Employers

Each employer that pays individual workers $600 or more during the year must issue a W-2 form. In total, employers must produce six copies of every W-2 form, which must be distributed accordingly: 

• Copy A is submitted electronically to the SSA. If fewer than 250 W-2s are being filed, paper copies may be submitted. 
• Copy 1 is used to report state or local income taxes withheld. It is to be submitted to city, state, or local tax departments. 
• Copy B is for the employee to file with his or her federal tax return. 
• Copy C is for the employee to retain for his or her personal records. 
• Copy 2 is for the employee to file with his or her state, city, or local tax return, depending on the requirements of the locality.
• Copy D is for the employer’s records. It should be retained by the employer for at least four years.

Filing Electronically or Sending Paper Forms

You can file W-2 forms either electronically or on paper. However, more often than not, electronic filing is faster and more secure. In fact, electronic filing is required by law for businesses filing 10 or more W-2s.

• E-filing: Use the SSA’s Business Services Online (BSO) platform. Register for an account, then upload your W-2 data or manually create up to 50 forms directly on the platform. The SSA generates a W-3 transmittal form automatically when you e-file, saving you time.
• Paper filing: If filing fewer than 10 forms, you can submit paper W-2s to the SSA. Be sure to include a W-3 form summarizing the data from all the W-2s.

W-2 Filing Deadlines

Employes must distribute W-2 forms by Jan. 31 each year. They must also file W-2s with the SSA by the same date. If Jan. 31 falls on a weekend or holiday, the deadline moves to the next business day. 

Requesting an Extension

If you’re unable to meet the Jan. 31 W-2 filing deadline, you can request an extension.

The IRS grants W-2 filing extensions only under specific circumstances, such as a natural disaster or another catastrophic event; death or serious illness of the responsible party; unavailability of necessary records or data; and unexpected issues with the business's filing system. Extensions are not granted for reasons like simple oversight or lack of preparation.

To request an extension, you’ll have to complete Form 8809 before the Jan. 31 filing deadline to be considered. The form can be submitted electronically through the IRS’s Filing Information Returns Electronically (FIRE) system or mailed to the address listed on the form's instructions.

A detailed explanation of the reason for the delay must accompany the request, including any supporting evidence, such as correspondence showing how circumstances outside your control prevented timely filing.

The IRS will typically respond within a few weeks. Approval is not guaranteed and is based on the reason and documentation provided. Even with an extension, you’re still required to provide W-2 forms to employees by Jan. 31. The extension applies only to filing forms with the SSA. If the extension is denied, file the W-2 forms as soon as possible to minimize penalties. Late filing penalties increase the longer you delay and are based on the number of forms and days late.

Correcting a Mistake on a W-2 Form

Mistakes on Form W-2 do occur, and when they do, it’s essential to correct them promptly to stay compliant and avoid potential penalties. Errors, such as incorrect employee names, Social Security numbers (SSNs), or wage amounts, require filing a corrected form, called Form W-2c, Corrected Wage and Tax Statement. Form W-2c is necessary to fix errors on previously filed W-2 forms, including issues with:

• Employee names or SSNs;
• Tax years;
• Federal employer identification numbers (FEINs);
• Employee earnings or tax withholdings; and/or
• Incorrect employee addresses (optional for the SSA).

If the mistake involves an employee’s address or is caught before sending Form W-2 to the SSA, different correction methods may apply (explained below).

Steps for Correcting Errors

1. Obtain the Correct Form: Use the official Form W-2c, available for purchase from authorized sellers or the IRS. Note that the downloadable version is for informational purposes only.
2. Complete Form W-2c: Fill out the form using black ink in 12-point Courier font, if possible. The form includes two columns:
• “Previously reported” information; and
• “Correct information” for federal, state, and local wage and tax details.
3. File Form W-2c and W-3c: Submit Form W-2c to the SSA along with Form W-3c, the transmittal form, which consolidates corrections. The SSA requires electronic filing if you’re correcting 250 or more forms.
4. Notify Employees: Provide employees with corrected copies marked “CORRECTED” and advise them on necessary updates to their records.

Special Situations

• Incorrect SSN or Name: Correct these by completing boxes a–i on Form W-2c. You don’t need to update wage or tax boxes for SSN or name corrections.
• Address Errors: If the issue is solely an incorrect employee address, issue a reprinted W-2 or a W-2c to the employee without filing it with the SSA.
• Multiple Forms for One Employee: If two forms were mistakenly filed under the same EIN, use Form W-2c to consolidate the amounts and report the correct figures.

File corrections as soon as you identify an error. Penalty amounts for incorrect W-2 filings depend on how quickly you file the correction. However, the IRS may waive penalties if you can demonstrate reasonable cause.

Preparation Is Key

As a small business owner, tackling W-2 Forms doesn't have to be overwhelming. By understanding their purpose, meeting deadlines, and ensuring accuracy, you can streamline the process and avoid costly penalties. 

The key to simplifying this annual task lies in preparation and the right tools. Using reliable software to track employee time, schedules, and payroll all in one place can make managing W-2s and other tax responsibilities far easier. OnTheClock offers a user-friendly solution to do just that. Having these tools available in one platform will help you stay organized and compliant throughout the year. Simplify your business operations today and enjoy stress-free tax seasons ahead by adding OnTheClock to your toolbox today. For more information, visit www.ontheclock.com.