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Since tax forms of all kinds are incredibly important to avoid sanctions by the IRS, it’s time to decode the basics of the W-2!
Tax season is almost upon us. For many workers, the W-2 form is one of the most important pieces of paperwork that full-time employees will receive from their employers. That said, younger members of the workforce might not understand how it all works, especially if they have only had one true “office” job for less than five years. Since tax forms of all kinds are incredibly important to avoid sanctions by the IRS, it’s time to decode the basics of the W-2!
The Fundamental Elements of the Form
Before we continue, it is useful to examine each individual component of the W-2. It typically includes the Social Security number associated with the employee so-named; the employer identification number is also on there. The name and address of both employers and employees can also be found on the form. The total amount of wages that were paid is mentioned, as are the relevant taxes that were deducted from the paycheck. Income adjustments, such as 401(k)s are also accounted for as well.
Who Needs to Fill One Out?
Employers, employees, IRS auditors, agents, officers, and state/local tax authorities are obligated to complete a W-2 form when its time comes around.
For the Employer
Let’s keep going and look at the employer’s role in more detail. They are required to send copies to the Social Security Administration, the Internal Revenue Service, and tax officials associated with state and local authorities. The minimum threshold for this type of record-keeping is $600, which probably isn’t difficult to accomplish.
For the Employee
All full-time employees also have a part to play in this complicated process. The Form W-2 is intended to help them complete their state and federal taxes every year – but wage and tax information must be entered correctly. In this past, this was a tall task, but with the advent of tax-preparation software programs, that daunting prospect is now much simpler.
The Role of the IRS
We cannot ignore the outsized role that the IRS has on the entire tax collection and record-keeping process. The appropriate data is used to calculate the amount of tax money owed by a certain person along with their eligibility for a refund versus a liability. However, that does not necessarily mean that an audit won’t happen.
Trust the Professionals at the Harding Group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for emails or phone calls and will strive for open communication with our clients. Whether you are interested in business advising, tax preparation, bookkeeping and accounting, payroll services, Training + support for QuickBooks, or retirement planning, we have the expertise and years of experience to help. We serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of taxes, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, YouTube, and LinkedIn.