As long as you aren’t working as a contractor, you’ve likely encountered a W-2 tax form.
The IRS mandates that employers distribute and use these documents to track your income and the taxes they subtract from it.
However, many employees sign W-2s without fully knowing what they are and what it means.
Let’s go over what the W-2 definition is and how it compares to other tax filing documents like 1099s.
Afterward, we’ll answer common questions about topics relating to turning in a W-2 and how you can make sure you’re receiving payment as you should.
What Is the Definition of a W-2?
If you receive a W-2 form from your employer, that makes you a W-2 employee.
It is the most common type of work arrangement in America.
Being a W-2 employee means that your taxes come from your paycheck and that your payment comes from your employer’s payroll.
Being a W-2 also describes the nature of your work and your role in the business.
This classification of an employee cannot be a contractor or boss.
By receiving and signing a W-2 form, you also agree to submit your taxes to the IRS at the designated time each year.
However, thanks to Prop 22 legislation, you don’t need to have a W-2 form to work in the United States or to earn money legally.
If you are an independent contractor, you can still work and earn money; you’ll just need to fill out different forms during tax season.
Example of a Full W-2 Form
If you want to know what a full W-2 form looks like, you can find examples on the IRS website or a tax help website, such as TurboTax.
W-2 Comparisons
A W-2 is just one of many tax-logging employment forms.
Let’s look at others and the differences between them.
W-2 vs. 1099
A W-2 and a 1099 form fulfill very similar roles.
While the former logs the amount of income and taxes acquired through your job, the latter describes the income you earn from outside sources unrelated to your employer or through independent contracting.
Some examples of 1099 information include rent, gambling winnings, independent contractor income, and interest.
The two main 1099 definitions are nonemployee compensation and miscellaneous information forms.
Independent contractors who have earned at least $600 receive the former.
The latter document is for logging other earnings like royalties, prizes, awards, healthcare payments, and more.
W-2 vs. W-4
Whereas a W-2 definition is a comprehensive account of your earnings and taxes over a year, a W-4 fulfills a slightly different purpose.
Namely, employers use W-4s to determine how much federal income tax an employee requires.
When someone fills out a W-4, they input their income, number of jobs, adjustments, and more.
With that information, an employer can tabulate how much federal income tax to withhold from the different types of workers’ payrolls, as per federal law.
While some jobs don’t directly require you to fill out a W-4, it is a good idea.
The IRS labels those who don’t as “single filers,” increasing the taxes withheld from a worker’s paycheck.
If you fill out the W-4, you can file for adjustments to lower the penalty.
Is W-2 the Same as W-3?
No, a W-2 and a W-3 are not the same.
Employers submit W-3s to the IRS to show the cumulative income of every employee combined.
W-2s show the income and taxes for each worker.
Who Is a W-2 Employee?
Anyone who receives a W-2 form is a W-2 employee.
People who earn consistent salaries as a worker and are not a contractor fit in this category.
If you are your boss, you are not a W-2 employee.
You have this status only if you work for someone else at a job that incurs federal and state income taxes.
Who Is a 1099 Employee?
1099 employees are often independent contractors and freelancers.
As long as you have earned at least $600, your work will assign a 1099 form for you to fill out.
W-2 Taxes
Let’s talk about the types of taxes that W-2 workers pay.
What Taxes Do W-2 Employees Pay?
There are many taxes W-2 employees must pay, as shown on the tax form’s boxes.
Cumulatively, these are called employment or payroll taxes.
The federal, state, and local income taxes are blanket subtractions from a worker’s payroll.
Medicare and social security taxes come next.
In addition to these benefits, workplaces may offer additional benefits like a 401k that require tax throughout the year.
Who Pays More Taxes: W-2 or 1099?
Employment taxes account for about 15.3% of a worker’s income, and self-employment taxes applicable to 1099 workers also constitute about 15.3%.
However, if you are a W-2 worker, your employer pays half of that 15.3% and subtracts the other half from your payroll.
If you are a 1099 freelancer, you must pay the entire percentage yourself.
Therefore, these workers pay more taxes than W-2 employees.
W-2 Benefits and Salary
Let’s talk about the status of W-2 and if it necessitates a salary or benefits.
Is W-2 a Salary?
No, a W-2 is not a salary.
A salary or wage is the gross income you earn from your job before taxes and deductions.
The W-2 is the amount that you keep after those subtractions, representing the dollar amount from your paycheck that you get to keep.
Do All W-2 Employees Get Benefits?
Under federal law, all W-2 employees must receive benefits like minimum wage, overtime, family leave, and medical leave.
Full-time W-2s must at least be offered benefits by their employer.
However, part-timers can only receive them at their employer’s discretion.
How Do You Get a W-2?
There are a few ways to get W-2s.
From Your Employer
Most commonly, workers receive W-2 forms from their employers by January 31st each year.
Since workers often mail the form in, they will often print it and send it to you in physical form.
By Mail
If you work from home or at a distance from your employer, the form may come in the mail.
Once it does, you must fill it out and send it to the IRS through postage or online.
Online
Your workplace may establish a program that electronically distributes and files W-2 forms.
You can also request one from the IRS online.
Frequently Asked Questions
Let’s wrap up by answering some frequently asked questions about the W-2 process.
What happens if you lost your W-2?
If you lose your W-2, you can call the IRS to notify them.
They will tell your employer to issue you a new form within ten days.
If you cannot request a new one or if your employer doesn’t provide one, you can fill out a 4852 as a replacement.
What happens if you find an error on your W-2?
If there is an error on your W-2, you can call the IRS just as if it were misplaced.
If your employer doesn’t provide a corrected form on time, you can submit a 4852.
What happens if you don’t receive your W-2 on time?
If you don’t receive a W-2 on time, the best solution is to submit a W-2 complaint with the IRS.
They will ensure that your employer is more vigilant in providing the proper documents on time.
Wrapping Up
Now you know the W-2 definition and its purpose.
These forms help you, your employer, and the IRS stay on top of your income and dues.
That includes the benefits you earn by law.
Since you can reap benefits by filling one out, workers often do.
If you don’t receive a W-2 but you meet the criteria, please call the IRS to resolve the situation.
If you have any lingering questions about W-2s, similar forms, and their purposes, please feel free to comment below.
