W-2 Forms: What They Are and How to Fill Them Out in 2022
Part of wrapping up the current year is preparing for income tax reporting in the next. It can seem complicated and confusing at first, but for HR and employers, filling out and filing W-2s can actually be quite straightforward, even if it is a little tedious.
So, what is Form W-2 and how do you fill it out? We’ll cover those questions in depth in this article.
What’s Form W-2?
Form W-2 is an IRS reporting document that details the amount of compensation paid to an employee for the year, including the amount of federal and state income, Social Security, and Medicare taxes that were withheld. The official IRS form includes six copies:
- Copy A to file with the Social Security Administration (SSA)
- Copy B for the employee to file with their individual federal tax return
- Copy C for the employee’s records
- Copy D for the employer’s records
- Copy 1 to file with State, City, or Local Tax Departments
- Copy 2 for the employee to file with their individual state, city, or local tax return
HR and employers should note that the current threshold for mandatory e-filing of Copy A with the SSA is 250 W-2s or more. However, the Taxpayer First Act will lower the mandatory e-filing threshold in subsequent years:
- 100 W-2s or more, beginning in 2022
- 10 W-2s or more, beginning in 2023
Every employer must file a Form W-2—also called a Wage and Tax Statement—for each employee from whom income, Social Security, or Medicare taxes were withheld in the previous year.
Form W-3—Transmittal of Wage and Tax Statements—should also be included when filing Form W-2. This summary form shows the totals of all W-2s for a particular employer, including wages paid and taxes withheld.
What’s the Difference Between Forms W-2 and W-4?
Since both are tax withholding documents required by the IRS, Forms W-2 and W-4 are often confused. To clarify, Form W-4 is completed by each employee when they are hired and is used by their employer to determine how much tax to correctly withhold from each paycheck. Form W-2, however, is completed by the employer, distributed to each employee, and reported to the IRS annually. W-4s always precede W-2s.
When is Form W-2 Due in 2022?
The deadline for filing Copy A with the SSA is Monday, January 31, 2022, which is also the last day for furnishing Copies B, C, and 2 to employees. Employers may request a 30-day extension by submitting Form 8809, so long as they meet at least one of the qualifying criteria.
What’s New for Form W-2 in 2022?
While the form itself hasn’t changed for the 2021 filing year, HR and employers should still be aware of withholding and reporting updates, including:
- Increase in Amount of Excludable Dependent Care Benefits: The American Rescue Plan Act (ARPA) increased the maximum amount—from $5,000 to $10,500—of dependent care benefits that may be excluded from an individual’s taxable income.
- Possible Discrepancies Due to COVID-Related Tax Relief: Some employers who claimed COVID-related tax credits or other tax relief in 2020 may notice a discrepancy when reconciling Forms W-2 and W-3 with Forms 941, 1040, and other tax documentation. For more information, see these instructions.
- Increase in Penalties for Failure to Furnish or File: Due to adjustments for inflation, the IRS has increased penalties for employers who fail to furnish or file W-2s correctly or on time:
- For filing correctly within 30 days of the deadline: $50 per form
- For filing correctly more than 30 days late but before August 1: $110 per form
- For failing to file correctly or before August 1: $280 per form
- The maximum penalty for employers is $3,426,000 per year, or $1,142,000 for small businesses
For last year’s updates, check out this article.
How to Fill Out Form W-2 in 2022
Form W-2 is divided into 6 lettered boxes for basic identifying information and 20 numbered boxes for reporting detailed wage and withholding information. Using Copy A, we’ll approach each section in order:
Boxes a-f: Identification Information
In Box a, provide the employee’s nine-digit social security number (SSN). If an employee has applied for but not yet received a SSN, write “Applied For” in the field rather than leaving it blank. You must correct it when the employee receives their card. Remember, employers may now truncate the employee’s SSN to the last four digits on employee copies of Form W-2. However, you may not shorten the SSN on Copy A, which is filed with the SSA.
For Boxes b and c, simply provide your nine-digit Employer Identification Number and the name and address of your organization. Enter the full name used to register your corporation or LLC and the legal address, even if it’s not the same as where employees report to work. This information should be the same on every employee’s W-2.
Box d is only required if your business uses a control number to internally identify each W-2. This is usually generated automatically by payroll processors—such as ADP, Proliant, and Paycor, which integrate with BerniePortal’s all-in-one human resources information system (HRIS).
Enter the employee’s name and address in boxes e and f. Remind employees to update their personal information at the end of each year to ensure accurate reporting in the next.
Boxes 1-2: Compensation and Income Tax Withheld
In Box 1, report the employee’s total taxable wages, tips, and other compensation, including any bonuses and fringe benefits subject to taxation. Do not include pre-tax benefits, such as health insurance premiums and contributions to an HSA, FSA, or 401(k). HR and employers should keep in mind HSA, FSA, and 401(k) maximum contribution increases for the 2022 tax year. For a complete list of what should be included, review the IRS guidelines.
The amount in Box 2—federal income tax withheld—should reflect the number of withholding allowances indicated by the employee on their Form W-4.
Boxes 3-6: Social Security and Medicare Wages and Tax Withheld
Box 3 is for reporting an employee’s wages that are subject to Social Security taxation. The amount in this field cannot exceed the Social Security wage base, which is $142,800 for the 2021 tax year. Do not include pre-tax deductions or tips in this box.
For Box 4, calculate 6.2% of Box 3. Since Box 3 cannot exceed the Social Security wage base, Box 4 cannot exceed $8,853.60 ($142,800 x 0.062).
The amount in Box 5—Medicare wages and tips—should be the same as the amount in Box 4 unless the employee’s compensation exceeds the Social Security wage base. In that case, Box 5’s number could be higher since there is no wage base for Medicare.
For Box 6, calculate 1.45% of Box 5. The Medicare tax rate, like that for Social Security, is shared equally by employer and employee. However, there is an additional Medicare tax—0.9%—that employees making over $200,000 a year must pay, which employers do not match.
Boxes 7-10: Social Security and Allocated Tips and Dependent Care Benefits
Include the employee’s reported tips in Box 7. The sum of Box 3 and Box 7 should equal Box 1 unless the employee’s total compensation exceeds the Social Security wage base of $142,800. These tips should already be included in the amount for Box 5.
Box 8 is only applicable for allocated tips that a large food or beverage employer might have paid to the employee. These tips should not be included in Boxes 1, 3, 5, or 7.
Leave Box 9 blank.
In Box 10, report the amount you reimbursed the employee for any dependent care expenses through an FSA. Remember, for the 2021 tax year, ARPA increased the nontaxable threshold for dependent care benefits from $5,000 to $10,500. Anything above that amount should be included in Boxes 1, 3, and 5.
Boxes 11-14: Nonqualified, Deferred, and Other Compensation
Box 11 is for reporting any distributions to employees from a nonqualified deferred compensation plan or a nongovernmental Section 457(b) pension plan. This should be included in the amount in Box 1 as well.
For Box 12, the IRS has designated a unique code for almost 30 types of deferred compensation, such as the tax-free portion of temporary disability and sick pay and group term life insurance benefits over $50,000. If any of these apply to the employee, be sure to include the code and the amount in the fields provided. See these instructions for a detailed list of codes and more information.
Box 13 contains three checkboxes:
- Check “statutory employee” if the employee works for your organization as an independent contractor but, for tax-withholding purposes, is treated as if they were an employee by statute. While the employer is not required to withhold taxes from their earnings, they are required to do so for Social Security and Medicare deductions.
- Check “retirement plan” if the employee was an “active participant” in a 401(k), 403(b), or other similar retirement plan for any part of the tax year. Do not check this box for any plans covered by Box 11, such as a nonqualified or Section 457(b) plan. For more information, see this retirement plan checkbox decision chart.
- Check “third-party sick pay” only if the employee received compensation from an insurance company or other outside payer.
Use Box 14 to report any compensation that isn’t covered by the previous categories, such as vehicle lease payments. For more examples, see these instructions.
Boxes 15-20: State and Local Income Tax Information
In Box 15, enter the state’s two-letter abbreviation and your organization’s ID number within that state. If the employee’s state does not require income tax reporting, leave this box blank. You can list up to two states on a single form.
Report compensation subject to state income tax in Box 16. Separate the incomes out if the employee worked for your organization in more than one state. Leave this box blank if the state has no income tax. It’s possible that the amounts in Boxes 1 and 16 may differ, depending on whether some wages are exempt from federal but not state income tax.
The amount in Box 17 should reflect how much you withheld for state income tax. As with Box 16, leave this box blank if the state has no income tax.
For Box 18, report any compensation subject to local income tax. Leave this box blank if the town or city has no income tax. You can list up to two localities on a single form. Again, it’s possible the amount in Box 18 may differ from Boxes 1 and 16.
The amount in Box 19 should reflect how much you withheld for local income tax. As with Box 18, leave this box blank if the town or city has no income tax.
Finally, in Box 20, enter the name of the town or city in which local income tax was withheld.
For more information on Form W-2, see the IRS’s exhaustive Instructions page.
Employer taxes—including federal, state, and local income taxes—can be complicated. It’s highly recommended you use a tax professional and an all-in-one HRIS like BerniePortal.
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