It’s that time of year again. People are getting their 2017 W-2 forms in the mail — and getting ready for tax time. But do you know the basics of W-2s and what every section means?
It’s a good idea to familiarize yourself, so we’re going to walk you through it below. That way, not only can you read your own W-2 (if you get one), but you can also answer questions from your employees.
(Remember, this post is for educational purposes — for specific tax questions related to your business, be sure to consult with a professional).
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What is the deadline for employers to file W-2s?
The deadline for employers to file 2017 W-2s to the Social Security Administration is January 31, 2018, for both paper and digital forms. This deadline is the same as last year.
Remember, there are penalties for filing late, so you’ll want to mark the deadline on your calendar.
(Do you employ independent contractors as well? The deadline to file 1099-MISC forms with the IRS is also January 31, 2018.)
How to read your W-2 Wage and Tax Statement
Let’s take a look at a W-2 a California employee might receive through Square Payroll:
Wages and taxes withheld
This is the most important section. It summarizes how much money you made and the amount of each tax that was withheld (subtracted from) your wages.
Box 1: Wages, tips, other compensation — This is how much you made from this employer last year in the form of wages, tips, and any other compensation. This is added to Line 7 of your federal personal income tax return.
Box 2: Federal income tax withheld — This is how much federal income tax was withheld from your pay. This is based on the Form W-4 you filled out when you started working. Taxes vary based on your filings status (being single, married, etc.), allowances for dependents, etc.
Box 3: Social Security wages — This is how much of your pay was subject to Social Security tax, not including tips.
Box 4: Social Security tax withheld — This is how much Social Security tax you paid.
Box 5: Medicare wages and tips — This is how much of your pay was subject to Medicare tax, including tips.
Box 6: Medicare tax withheld — This is how much Medicare tax you paid.
Box 7: Social Security tips — This is total amount of reported tips that were subject to social security tax.
Box 14: This box includes any other taxes you paid, union dues, uniform payments, health insurance premiums deducted, etc. In this case, it shows the amount of CA state disability insurance paid.
Box 15: This box has your employer’s state identification number.
Box 16: State, wages, tips, etc. — This is the total of your wages, tips, and other compensation that was used to calculate how much state income tax you paid for the year.
Box 17: This is how much state income tax you paid.
How do I prepare W-2s for my employees?
Most payroll services will mail Form W-2 to each of your employees. But sometimes, they’ll charge you for each one they produce and send. This isn’t the case with Square Payroll. There are no hidden fees or surprises.
We want to make the W-2 process as hassle-free as possible for your business, so you can, well, get back to business.
Square Payroll generates and files Form W-2 for each of your employees at the end of the year. And it will mail W-2s to the mailing address provided by each of your employees. However, it’s still your (and your employees’) job to ensure that the information in the W-2s is accurate. (You can download W-2s through your Square Dashboard.)