How To Prepare W-2 Wage and Tax Statements

How to Prepare Form W-2
Directions for Preparing Form W-2. DNY59/Getty Images

What is Form W-2?

Form W-2 includes information on employee wages paid the previous calendar year and withholding from those wages, as well as information on benefits, and other deductions from wages.

When are W-2 Forms Due? 

W-2s are due to employees by the end of January, for the previous calendar year. If January 31 is a weekend or holiday, the reports are due the next working day. Here are the key end-of-year payroll tax reporting due dates for the current year.

After you have given W-2 forms to employees, you must also submit these forms, along with transmittal form W-3, to the Social Security Administration (SSA).

New Due Date for Submitting W-2s to SSA  

You must file 2016 W-2s with the SSA no later than January 31, 2017. This earlier date is an attempt to curb tax fraud. Read more about the 2017 annual payroll tax report deadlines.

Gathering Information to Prepare W-2 Forms

The information for this form comes from your payroll register, which shows year-to-date totals for each employee for wages and withholding, along with deductions for medical plans, health savings accounts, and other items.

Here are more details about the information you will need in order to prepare these W-2 forms. 

Difficulty: Average

Time Required: Depends on number of employees and number of deductions and additional payments

Here's How to Prepare Form W-2

  1. Employer Information
    For each W-2 you prepare, you will need to include information about your business:

    Control Number
    You may want to add an internal control number on each W-2, if you are paying many employees. You can generate the number yourself, or your payroll preparation software may generate this number.

    You will also need 

  1. Employee Earnings
    Next, you will need information about employees and total wages and withholding for each employee for last year:

    • Total wages, tips, and other compensation (Box 1)
    • Total amount of withholding(Box 2)
    • Total Social Security wages (up to the Social Security maximum)(Box 3)
    • Total Social Security Tax Withheld (Box 4)
    • Total Medicare wages and tips (same as total wages)(Box 5)
    • Medicare tax withheld (Box 6)
    • Social Security tips (Box 7) and allocated tips(Box 8)
  1. Other payments. You may have paid advance EIC payments (earned income credit)(Box 9) and dependent care benefits (Box 10) paid to employees.

  2. Information on Retirement Plan Participation, Statutory Employees
    On each W-2 you must check the appropriate box if the employee participates in a retirement plan (Box 13) or a non-qualified plan(Box 11), if this employee is a statutory employee (Box 13), or if the employee received third-party sick pay (Box 13.

  3. Box 12
    Box 12 is for amounts for other compensation or reporting, to enter into 1-4 boxes. Some of the most common information for Box 12:

    • Uncollected Social Security, RRTA (railroad retirement), or Medicare tax, on tips or group life insurance
    • Elective deferrals to 401(k), 403(b), and other qualified retirement plans
    • Non-taxable sick pay
    • Golden parachute payments
    • Excludable reimbursed moving expenses
    • Contributions to medical savings accounts or health savings accounts
    • Non-statutory employee stock options
    • Designated Roth contributions under 401(k) or 403(b) plans
    • Cost of employer-sponsored health coverage, using Code DD, according to the reporting requirements of the Affordable Care Act
  4. Box 14
    Entries in Box 14 are for other deductions or compensation that must be disclosed to employees for their tax returns. For example

    • After-tax pension
    • Auto reimbursements
    • Special taxes for California, New York, New Jersey, and Washington
    • Charitable contributions deducted from employee pay
    • Health insurance and fringe benefit deductions
    • Uniform deductions (for cost of uniforms)
    • Union dues deductions
    • Nontaxable income
    • Vehicle expenses included in wages (100% of lease value of vehicle furnished to employee and included in Box 1 wages)
    • There is also a box for "Other-not on list" items you have deducted from employees
  1. State and Local Information
    In this section you will enter information about state and local wages and withholding. Enter:

    Note that there is space for two states and two localities on the form. If someone has worked in more than two states or localities during the year, use a second W-2 to include the additional information.

    • Your two-letter state code and your business's state tax ID number (check with your state's department of revenue)(Box 15)
    • State wages (Box 16)
    • State income tax withheld (Box 17)
    • Local wages, if any (Box 18)
    • Local income tax withheld (Box 19)
    • Locality name (Box 20)
  2. Check For Accuracy
    Spend time making certain that the information you are providing to employees (and ultimately to the Social Security Administration and IRS) is accurate. Check your payroll register totals for the year and run a W-3 to assure accuracy of all the information you are submitting.

  1. Pre-printed Forms
    If you are printing your own W-2 forms, you may obtain them from several sources:

    The W-2 is a multi-part form. Here are the pages of this form:

    • The IRS Forms Order website (takes 7-15 days)
    • An online forms supplier or office supply store.
    • Copy A goes to the Social Security Administration. Copy A is usually printed on a red form.
    • Copy 1 is for the city, state or locality
    • Copy B is for filing with the employee's federal tax return
    • Copy C is for the employee's records
    • Copy 2 is another copy for another city, state, or locality
    • Copy D is for the employer's records.
  2. Print W-2s
    Print out the forms, checking to see that they align with a pre-printed format, if you have one.

  3. Distribute the W-2s

    • To the Employee: Copies B, C, 1, and 2
    • To the Social Security Administration - Copy A. The SSA requires that you send Copy A from each employee's W-2, along with Form W-3, by the end of February.
    • Keep Copy D for your records.
  4. Still confused about Form W-2? Answers to Your Questions About 2011 W-2 Form

Tips on Preparing Form W-2

  1. Your business's state tax ID number is NOT your state sales tax ID number. Many states use the federal tax id number (EIN) and add digits onto the end. Check with your state department of revenue for information.
  2. Box 12 - More than 4 Items
    If you have more than 4 items for Box 12, you will need to put the additional items on a second W-2. But don't include the employee's wage and withholding on this additional W-2.
  3. Form W-3, along with Copy A from all employee W-2 forms, is due to the Social Security Administration by January 31, beginning with the 2016 tax year. Even if you have completed the W-3 and you have all the W-2 forms, don't send these off yet, until employees have had an opportunity to review the forms. If they find errors, you can fix them before you send the consolidated report to the SSA.
  4. Disclaimer
    The information provide in this "How To" is for general purposes, to help you collect the information you need to prepare and print W-2 forms. It is not intended to be tax advice and in no way does this information attempt to be comprehensive or to tell you all the information that must be included in your W-2 forms. Talk to your tax adviser for information about your specific situation.
  5. Back to Filing Year End Wage and Tax Reports