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Four important factors to know about the W-2 forms

The W-2 form is the statement that provides the details of employees’ compensation from their employer. It was earlier known as the “Wage and Tax Statement.” It can be easy to get confused between a W-2 and W-4 form. The W-4 form is used to convey to the employer the amount of tax to withhold from the employee’s paycheck every pay period. Also, these forms are specifically for people who work under someone, that is, when they have employers.

In the case of contract workers or freelancers, a different form is needed from their client and not the W-2. Also, if you have ever been employed by somebody, you might be receiving a form in the mail in the month of January or February. This form has a number of little boxes on it; it may seem like a bill, but it’s the W-2 form. During the entire previous year, any employer who has paid at least $600 to you has to send a W-2 form to you. The information on the W-2 form determines whether one is eligible for getting a refund or, instead, will be writing a check in the coming month of April. Hence, the W-2 form is extremely essential and holds a lot of importance.

Below are the important factors you must know about the W-2 forms:

The W-2 form is needed while filing your taxes
You need a W-2 form while filing your taxes as the form gives the information about the income you have earned in the past year and the amount of tax that you have already paid on your earnings. The W-2 form is essential for a lot of income information while filing your taxes.

The W-2 form is not an optional form
Copies of your W-2 form are legally needed to be sent to the Social Security Administration (“Copy A”) and the state and local tax authorities (“Copy 1”). It is something that employers are bound to send and not something that’s optional. You cannot just ignore the form and decide that you don’t want to give out the information on your tax return. If you simply ignore filing and sending copies of your W-2, you might get a terse letter. Also, a few months down the line, you might have to deal with the IRS and the state in cases where your state charges income tax. This happens soon after the state has compared your tax return to the information that was provided by your employer to the Social Security Administration. Hence, it is important to know that W-2 is not an option, and it’s essential to file the same.

The W-2 form discloses more information than simply what you have to or don’t have to pay
The W-2 form reflects the amount that you have earned in the form of wages and tips. Additionally, it also discloses the amount that you have contributed to your retirement during the year, the amount that you have received in case of dependent care benefits, and even the amount paid by your employer for your health insurance. This information mentioned affects your overall tax. For example, your retirement contributions might not be taxable.

There is a possibility of an error by your employer
It is important that you check the W-2 form filled by your employer as minor mistakes like leaving out a decimal point, spelling your name wrong, checking the wrong box, or mentioning the wrong amount might happen. In such cases, point out the mistake and ask for a corrected W-2 form. Conveying the right information is important even though waiting for the new W-2 form might take time. The IRS might even file your employer in case of certain errors like the wrong amount.

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