A W-2 form depicts the amount of taxes withheld from your salary for the year and is applied to record your federal and states fees. It is a requirement by IRS that each employer to record their wage and income information for their workers on Form W-2. Your W-2 form also indicates the amount of state, federal and other taxes which are withheld from your salary. It is imperative to understand that the data on your W-2 is vital when you are preparing tax return. The IRS has it that each employer must present to their workers the W-2 form before January 31 after the close of the tax year which is mainly on December 31 thus avoiding lateness. Note that you should only get a W-2 form if you are an employee. W-2 form is portioned into boxes with each one of them representing various subjects related to your salary.
Box 1 depicts the annual wage and income payments while the box 2 outlines the federal tax deducted from your yearly earnings. Box 3, on the other hand, will record an amount lower than your annual salary which is resulted by the fact that only a portion of your income is subject to Social Security tax. Other boxes which are on W-2 form outlines the payments subject to social security taxes and Medicare tax which are withheld and details on your state income tax withholding, if applicable. It is imperative to understand that when an employer deducts specific amounts from their employee’s salary for government income taxes, they are required to submit them to the IRS throughout the year. The IRS needs every employee to make periodic payments throughout the year, but your employer handles this for you. It is essential to learn that when you prepare your federal tax return and make the summation of your tax throughout the year, the deducted amounts your employer reports must be subtracted from your tax payments.
When you carry out the calculations, you will realize whether you will be refunded or add more amounts. The same summations are useful when you are handling the state tax return for the amount needed to pay your state income taxes. The recognizing information section of the W-2 form is a critical monitoring feature. When the salary you record on your taxes fails to match the information on your W-2, the IRS will demand to know the reason. Also, IRS will match the reported payments with your employer’s business tax return for accuracy. Note that when IRS gets your W-2 form, it will tell whether you owe tax and contact you when you fail to file return.