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The IRS requires employers to report wage and salary information for employees on Form W-2.

Your W-2 also reports the amount of federal, state and other taxes withheld from your paycheck.
As an employee, the information on your W-2 is extremely important when preparing your tax
return. To insure you have it in time, the IRS requires your employer to send you a W-2 no later
than January 31 following the close of the tax year, which is usually December 31.

W-2 wages and withholding

You should only receive a W-2 if you are an employee. If you are an independent contractor or
self-employed, the work you do may be the same as an employee, but you will receive an
earnings statement on a Form 1099 rather than a W-2.

The W-2 form is divided into boxes that report various items relating to your income. In box 1 of
the W-2 you will find your annual wage and salary payments with the amount of federal tax
withheld from it in box 2.

Since only a portion of your income is subject to the Social Security tax, you may find that box 3
reports an amount that is less than your total wages for the year. Other boxes on the W-2 form
include your wages subject to Medicare tax, Social Security taxes that are withheld and
information on your state income tax withholding, if applicable.

Importance of your tax withholding


When your employer withholds amounts from your paycheck for federal income taxes, those
amounts are remitted to the IRS throughout the year. You may not realize it, but in most cases,
you cannot wait until April 15 to pay your entire tax bill. The IRS requires everyone to make
periodic payments throughout the year; however, your employer takes care of this for you.

When you prepare your federal return and calculate your tax for the year, the withholding
amount your employer reports on the W-2 must be subtracted from your tax bill. Once you
perform this calculation, you will know whether to expect a refund or make an additional tax
payment. If you file a state income tax return, the same calculation is necessary for the amount
withheld to pay your state income taxes.

Verifying your name and Social Security number

The identifying information section of the W-2 is essentially a tracking feature. If the income
you report on your taxes does not match the information on your W-2, the IRS will want to know
why. Similarly, the IRS will match the reported payment amounts with your employer's
corporate tax return for accuracy.

But most importantly, since the IRS receives a copy of your W-2, it already knows whether you
owe tax and may contact you if you fail to file a tax return. If the name or Social Security
number on your W-2 is inaccurate, you should immediately report this to your employer to
correct.

Attaching your W-2

When you finish your tax returns and get ready to file them, remember that a copy of your W-2
must always be attached. If you e-file using TurboTax then your W-2 information is sent along
with your tax return. However, if you are filing your tax return by mail then you need to place a
copy on the front of your return.