Financial Glossary
Form W-2 (Wage and Tax Statement)
Form W-2 is an IRS tax document that employers in the U.S. must issue annually to employees. It reports an employee's total wages, tips, and other compensation, along with the federal, state, and other taxes withheld throughout the year.
Problem & Application
Employers are legally required to send W-2 forms to employees and file them with the IRS by January 31st each year. Errors in W-2 filings, like incorrect income or Social Security numbers, can lead to IRS penalties, delayed tax refunds for employees, and compliance risks. Employees use the W-2 to file their annual personal income tax returns.
In Short
The W-2 is a critical tax document that ensures employees report income accurately and that employers comply with tax withholding obligations. Timely and accurate W-2 filings are essential for both employer compliance and employee tax filing.