Each January, employers give every employee a Form W-2 summarizing wages paid and taxes withheld during the prior calendar year, and send copies to the Social Security Administration with a Form W-3 transmittal. The IRS outlines the requirements on its Form W-2 page, and the SSA's employer services site explains electronic filing.

Who gets a W-2

Anyone you paid as an employee during the year, including people who left early in the year, receives a W-2. Independent contractors do not; they may receive a Form 1099-NEC instead. If you are unsure which category someone falls into, see our guide on employee or independent contractor.

What the main boxes show

  • Box 1: wages subject to federal income tax, after pre-tax deductions such as many retirement deferrals
  • Box 2: federal income tax withheld
  • Boxes 3 and 5: Social Security and Medicare wages, which often differ from Box 1 because some deductions reduce income tax wages but not Social Security and Medicare wages
  • Boxes 4 and 6: Social Security and Medicare tax withheld
  • Box 12: coded items such as retirement deferrals and the cost of employer-sponsored health coverage
  • Boxes 15 to 20: state and local wages and taxes

Box 12 codes are where many errors occur; the W-2 instructions list each code.

The January 31 deadline

W-2s must generally be furnished to employees and filed with the SSA by January 31. Unlike many information returns, there is no automatic extension for filing W-2s with the SSA; an extension must be requested and is granted only in limited circumstances.

Reconcile before you file

The most important check is that W-2 totals agree with the four quarterly Form 941 returns for the year. We compare:

  1. Total Box 1 wages with total wages reported on the 941s
  2. Total Social Security and Medicare wages and tax with the 941 lines
  3. Federal income tax withheld with the 941 totals
  4. State wages and withholding with state quarterly filings

Differences usually come from a correction made in payroll but never reported on a 941, or a fringe benefit added at year end.

Correcting a W-2

Errors found after filing are corrected with Form W-2c and, for the SSA, Form W-3c. Correct quickly; employees may already be using the original form to file.

Electronic filing

Employers filing 10 or more information returns in total during a year generally must file electronically, a threshold that counts W-2s together with other information returns. The SSA's business services online system accepts electronic W-2 filing.

If year-end reporting is stressful, our payroll services include W-2 preparation and reconciliation.

Year-end payroll checklist

  • Confirm employee names, addresses and Social Security numbers
  • Add taxable fringe benefits, such as personal use of a company vehicle, before the final payroll
  • Include S corporation shareholder health insurance where applicable
  • Reconcile the four quarterly Forms 941 to the W-2 totals
  • Confirm retirement plan deferrals in the correct boxes
  • Check state wage and withholding totals

Furnishing and filing

Employees must receive their copies by the deadline, and the SSA filing deadline generally falls on the same date for Forms W-2 and W-3. The SSA's Business Services Online allows employers to file electronically. Late or incorrect forms can lead to penalties, so build in time for review.

Key terms

Definitions for terms used in this guide, from our small business glossary:

  • Fringe Benefits: Fringe benefits are forms of pay other than wages, such as health coverage, vehicles or discounts, which are taxable unless an exclusion applies.