Six things to know about your W-2(Read article summary)
W-2s are important forms in the working world that take record of more than just the money you've earned in the past year. Here are six things you should know about W-2s.
Mary Knox Merrill/The Christian Science Monitor/File
If you’ve ever been somebody’s employee, you’ve probably noticed that every January or February, you receive a form with a lot of little boxes on it in the mail. It’s not a bill — it’s a W-2, and every employer that paid you at least $600 during the year has to send you one.
The W-2 form, formally called the “Wage and Tax Statement,” details your compensation from an employer. Don’t confuse it with your W-4 — that’s the form you use to tell your employer how much tax to withhold from your paycheck every pay period. And notice the key word here: employer. Freelancers or contract workers get 1099s from their clients, not W-2s.
The W-2 form is really important. For most people, the information on it determines whether they’re getting a refund or writing a check in April. Here are six things you need to know about how to handle it.
1. You need your W-2 to do your taxes
Your W-2 tells you how much you earned in the past year and how much you already paid in taxes on those earnings. When you do your taxes, you’ll need the W-2 to fill in a lot of the information.
2. It’s about more than just your pay
Sure, your W-2 shows how much you earned in wages and tips. But it also details other stuff, such as the amount you contributed to your retirement plan during the year, how much your employer paid for your health insurance, or even the amount you’ve received in dependent care benefits. All of that data affects your tax picture — your retirement contributions might not be taxable, for example.
3. It’s not a secret
Employers are legally required to send copies of your W-2 to the Social Security Administration (“Copy A”) and your state and local tax authorities (“Copy 1”). So you won’t get away with anything if you just shove your W-2 in a drawer and decide not to put the information on your tax return. In fact, you’ll probably get a terse letter and a few months’ worth of headaches from the IRS — and the state, if your state has income taxes — after they compare your return to the information your employer sent to the Social Security Administration.
4. Your employer has to send you a W-2 by the end of January
The IRS requires employers to furnish their W-2s to the government and employees by Jan. 31 or face penalties. The IRS defines furnish as “get it in the mail,” which means you should have your W-2 in hand by the first week of February. Employers can also send employees their W-2s electronically, but it’s not required.
Even if you quit your job months ago, your ex-employer can still wait until Jan. 31 to send you a W-2 — unless you ask for it earlier, in which case the employer has 30 days to provide it.
5. Your employer might make an error
If your employer leaves out a decimal point, gets your name or a dollar amount wrong, or checks the wrong box — it happens — point out the mistake and ask for a corrected W-2. Pointing out the mistake and waiting for a new W-2 will cost you time, but here’s something that could make you feel better: The IRS might fine your employer if the error involves a dollar amount or “a significant item” in your address.
6. The correct address is really important
If your W-2 doesn’t show up by Valentine’s Day, first ask your employer for a copy and make sure it’s got the right address. If that doesn’t fix things, call the IRS (1-800-829-1040). You’ll need to provide information about when you worked and an estimate of what you were paid.
Remember that your tax return is still due in April, so you might need to estimate your earnings and withholdings to get it done on time. Go here to learn more about getting an extension. Plus, the IRS might delay processing your return — read: refund — while it tries to verify your information. If your W-2 finally shows up after you already filed your tax return, you might need to go back and amend it.
Tina Orem is a staff writer at NerdWallet, a personal finance website. Email:firstname.lastname@example.org.
This article first appeared at NerdWallet.