The W-2 form shows the total amount of taxes deducted from your earnings for the year and is employed to report your federal and states charges. 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. When making your tax return; you need to have the data from your W-2 form. It is imperative to understand that when you are preparing your tax return, you will need to have all the information from your W-2 form. 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. It is essential to realize that W-2 form is only for the people who are employed. The W-2 form is divided into portions with each part showing a particular article linked to your salary.
In box 1 of the W-2 form, you will find your annual wage and salary payments with the federal tax withheld from it in box 2. 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. IRS require that every worker to make payment throughout the year which is a tedious task but the employer steps in to take care of it. 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.
Making the summations are vital in that it will help you to determine whether you need to ask for a refund or additional payments. When you record a state tax return, same calculations are required for the amount deducted to clear your state income taxes. The recognizing information section of the W-2 form is a critical monitoring feature. Note that when the income your report on your charges does not coincide with the details on your W-2 form, the IRS will request an explanation. Also, IRS will match the reported payments with your employer’s business tax return for accuracy. When IRS receives a copy of your W-2, it will determine whether you owe tax and will contact you if you default in filing a tax return.