Summary: The W-2 form is the IRS form used to record that an individual is an employee of a company, and in light of that, income taxes must be withheld and...

Whether you’re a worker or an employer in the US, you’ve almost certainly heard the term “W-2 employee” before. This term gets tossed around all the time, but it’s not always used accurately. To understand what a W-2 employee is, you need to know how to answer the question, “What is a W-2 form?” We’ve prepared this article as a quick read to explain what W-2s are and what they’re used for in terms that anyone can understand. 

W-2 Form Meaning

Let’s start with what everyone calls it – Form W-2. While this is what everyone calls this form, it’s not actually its name. Instead, the official name used by the Internal Revenue Service (IRS) is the Wage and Tax Statement. However, the IRS has over 800 forms and schedules that different people need to fill out for different reasons. Therefore, they all have to have a unique code to help IRS employees keep track. Form W-2 is W-2 because it replaced the original Return of Income Tax Withheld on Wages Form W-1.

Now that we know that the real name of Form W-2 is the Wage and Tax Statement, it becomes a lot easier to understand what it’s for. This form must be filled out by an employer for each employee they pay wages or salaries to and from whose paychecks they withhold income tax. On it, the employer includes their own information (name, address, Employer Identification Number); the employee’s personal information; the employee’s earnings (wages and tips), deductions, and taxes withheld; and state and locality information. This information is used when the employee files their federal and state tax returns.

Now that you know that a W-2 form is actually a Wage and Tax Statement made by employers on behalf of their employees, it’s easy to understand what a W-2 employee is. If an employer pays wages or a salary to a worker and deducts taxes from their pay, they are a W-2 employee.

Who Fills Out Form W-2?

The employer is responsible for filling out Form W-2. 

Employers must fill out and provide these forms to any employees they paid more than $600 in wages or salary during the tax year and withheld income, Social Security, and Medicare tax from. These W-2 employees differ from independent contractors (“1099 workers”) who employers pay but don’t withhold taxes from.

Employers are legally responsible for tracking the amounts they pay their employees. They must also deduct income tax, Social Security, and Medicare payments from their employees’ paychecks and remit these funds to the appropriate authorities. They must also report these amounts on Form W-2.

The W-2 form is actually made up of six copies and the employer must fill them all out the same way. The employer must provide the employee with three copies (for their personal records, federal filings, and state filings) by the 31st of January. This gives the employee time to use the W-2 on their income tax return, which is due on the 15th of April.

Who Files Form W-2?

To understand who does what with the W-2 form, we need to look at the six copies and what they’re used for.

  • Copy 1: For the state, city, or local tax department 
  • Copy 2: To be filed with the employee’s state, city, or local income tax return
  • Copy A: For the Social Security Administration
  • Copy B: To be filed with the employee’s federal tax return 
  • Copy C: For the employee’s records 
  • Copy D: For the employer 

As we’ve seen, the employer is responsible for filling out all six of these copies if providing a paper W-2 form. If they create the W-2 form online, copies will be made automatically, and everything will be much easier to manage.

The employer is required to send Copy 1 to the state or local tax department and Copy A to the Social Security Administration. The employer keeps Copy D for their own records and then must provide the employee with Copies 2, B, and C.

The employee keeps Copy C for their own records. They file Copy B with their federal tax return (Form 1040) to the IRS. They also file Copy 2 along with their State tax return or Local tax return if their state does not levy state income tax.

What’s on a W-2 Form?

The details contained on Form W-2 include the information relating to the employee and employer as well as the employee’s wage and tax information. It’s arranged in the following way:

Boxes a-f

Boxes a through f show details of the employer’s and employee’s information:

  • Box a – employee’s Social Security Number (SSN)
  • Box b – employer’s Employer Identification Number (EIN)
  • Box c – employer’s name, address, and ZIP code
  • Box d – control number (a unique number for each W-2 form)
  • Box e – employee’s first name, initial, and last name
  • Box f – employee’s address and ZIP code

Boxes 1-20

Boxes 1-20 show the employer’s state and federal tax numbers as well as the earnings, tax withholdings, and deductions of the employee for their year of work as follows:

  • Box 1 – Employee’s total income (wages, tips, and other compensation) subject to federal income tax
  • Box 2 – Federal income tax withheld from employee’s pay
  • Box 3 – Employee’s wages subject to Social Security tax
  • Box 4 – Social Security tax withheld from employee’s pay
  • Box 5 – Employee’s total wages and tips subject to Medicare tax
  • Box 6 – Medicare tax withheld from employee’s pay
  • Box 7 – Employee’s tips subject to Social Security tax
  • Box 8 – Tips allocated to the employee
  • Box 9 – Verification code (often left blank)
  • Box 10 – Dependent care benefits paid to the employee 
  • Box 11 – Amount paid to the employee from a non-qualified deferred compensation plan
  • Box 12 – Earnings and contributions that may be taxable (see below)
  • Box 13 – Boxes to tick if the employee is a statutory employee, actively participated in a retirement plan, or received sick pay payments from a third party
  • Box 14 – Other deductions (ex., uniform fees, union dues, health insurance premiums deducted, state disability insurance taxes, etc,. deducted from the employee’s paychecks)
  • Box 15 – State and employer’s state tax identification number
  • Box 16 – Employee’s total income (wages and tips) subject to state tax
  • Box 17 – State income tax withheld by the employer
  • Box 18 – Employee’s total income (wages and tips) subject to local tax
  • Box 19 – Local income tax withheld from employee’s pay
  • Box 20 – Locality name (name of the city or town where the employee works)

W-2 Form Box 12 Codes

The most complicated part of Form W-2 is Box 12. Normally, this box actually appears as four sub-boxes: 12a, 12b, 12c, and 12d. You’ll see that in each sub-box, there is a smaller space on the left and a larger area on the right. What are these for?

The smaller spaces on the left of these sub-boxes will be filled with codes, while the larger areas on the right will give dollar amounts. There are 35 different codes that can be used in these boxe,s and while we won’t explain them all here, these are some examples:

  • Code A – Uncollected Social Security or Railroad Retirement Tax Act (RRTA) tax on the employee’s tips
  • Code B – Uncollected Medicare tax on the employee’s tips
  • Code C – Taxable cost of group-term life insurance coverage over $50,000 provided to the employee

In addition, employers are allowed to add more than four different codes and amounts when filling out different copies of the W-2. However, they shouldn’t use more than four codes on Copy A for Social Security. If more codes are needed, they should be continued on an additional Form W-2.

W-2 Form Penalties

The IRS assesses various penalties related to the W-2 form including fines for late submissions and for incorrect information.

If employers provide W-2 forms late to their workers or to Social Security or the state tax department, they can be fined. Employees can also be fined if they don’t file their W-2s on time with their tax returns. The current fines for 2025 are: 

  • $60 up to 30 days late
  • $130 for 31 days up late up to the 1st of August
  • $330 when filed after the 1st of August or not filed

These fines are “per receiver”. This means if the employer sends the W-2 even a few days late to both the employee and Social Security, for example, they’ll be fined $120 for these two receivers.

Employers are also fined $340 for incorrect amounts on W-2 forms if earnings amounts are off by more than $100 or deductions by more than $25.

Finally, if employers disregard the requirement to create W-2 forms, they can be fined $680 per W-2 form.

Form W-2 and You

We hope this summary has given you the information you need as an employer or employee about Form W-2 Wage and Tax Statement. Whether you need to produce them or use them to fill out your tax return, W-2 forms can be easy to handle once you know what they include and what they’re used for.