As a leading provider of online payroll services for small business, it's not uncommon for BenefitMall to work with clients who have W-2 questions. In an effort to make using the W-2 form a little bit easier, we have put together a basic explanation of the form. Just follow this guide with your employees, and everyone should be able to understand it better. If you are looking for additional help for your payroll department, BenefitMall offers a full selection of payroll and benefits administration services. We would be happy to help you streamline your payroll and benefits in order to save you money and reduce costly mistakes.
Box 1: Wages, Tips, Other Compensation
This box is the most important one on the W-2 form. This is where employers list all earnings subject to federal reporting for income tax purposes. This includes all gross earnings including hourly wages, tips, and taxable employer-provided benefits that would include things such as tuition assistance, child care assistance, etc.
Boxes 2-6: Wages and Taxes
These five boxes are for entering information regarding wages and taxes. Box 2 lists the total amount of income tax withheld during the tax year; box 4 lists the total amount of Social Security taxes withheld; box 6 lists the total Medicare taxes withheld. As for boxes 3 and 5, these list the total amount of income subject to Social Security and Medicare taxes respectively.
Boxes 7-8: Tips
These two boxes can be somewhat confusing. Box 7 lists the total amount of tips a worker receives subject to Social Security tax. Box 8 is similar in that it applies to allocated tips. These two boxes are rarely used except in select industries like hospitality and food service.
Boxes 10-14: Other Benefits and Their Deductions
Boxes 10-14 can present special challenges in many cases. These challenges are a great example of why contracting with a payroll service company like BenefitMall is so beneficial. The five boxes cover things such as dependent care benefits, qualifying and non-qualifying retirement plans, cafeteria plans, and the like. These boxes are where employers list payroll deductions made for the employee's share of benefit payments.
Bear in mind that box 12 operates almost as a miscellaneous box for reporting all kinds of employee benefits. This box comes with special instructions. Take the time to read and understand instructions for completing box 12, and consult with a professional if you need to. Box 12 is responsible for a significant share of W-2 errors.
Boxes 15-20: State and Local Information
The remaining six boxes are the state and local equivalents of boxes 1-8. In most cases, the numbers will be similar to those entered in the first eight boxes. That's because most states defer to federal regulations for determining taxable wages. However, that's not always the case. Again, this is where contracting with a company like BenefitMall comes in handy.
It's important for small businesses to know their state and local regulations in order to ensure W-2 forms are filled out correctly. Businesses operating in large metropolitan areas like New York and Los Angeles have even more concerns due to local taxes.
We hope this guide has made understanding the W-2 form a bit easier. If you are still handling payroll in-house, you could avoid the W-2 confusion altogether by allowing BenefitMall to handle payroll for you. We are happy to assist you with your payroll needs!