How to Fill Out W2 Form – Small Business Guide
If it’s your first time filling out a W-2 form for your employee, or even your fifth, you likely have a few questions. Each year brings its own challenges when filling out Form W-2.
Even with a payroll service helping you, you might find yourself needing to explain something to an employee who raises a W-2 form-related question.
In this post, we’ll go box-by-box, covering the main points on how to fill out a W-2 form so that you're better equipped to navigate questions when they come up.
Here’s What We’ll Cover:
Step-by-Step: Filling Out Form W-2
The instructions provided by the IRS on Form W-2 can appear long-winded. Here are the main points you should know about each box as a small business owner or freelancer.
Box A— Social Security Number
Include employee’s Social Security number (SSN). Here’s a handy tool to find SSNs
Box B— Employer Identification Number (EIN)
Put your specific Employer Identification Number. It's a common mistake to include an employee's Social Security number here.
Waiting on your EIN? Write “Applied for”.
We’ll skip box C as it’s self-explanatory.
Box D— Control Number
Control number is optional.
Boxes E and F— Employee Name and Address
Enter employee names as shown on their Social Security card. If the name of an employee doesn't fit, put the initials of their first and middle name. It’s more important to have the full last name of your employee on IRS Form W-2.
Box 1— Wages, Tips, Other Compensation
Include wages, tips, and other compensation that are subject to federal income tax
We’ll skip box 2, federal income tax withheld is self explanatory.
Box 3— Social Security Wages
Include the total wages subject to Social Security tax. There’s a chance this number will be different from box 1. The Social Security Administration doesn't require employees to pay Social Security taxes on wages above $142,800 in 2021.
Box 4— Social Security Tax Withheld
Same concept as box 2. Be sure to only include the amount paid for your employee, not your share. Generally, employers split Social Security tax and Medicare tax (box 6) 50% with the employee.
Box 5—Medicare Wages and Tips
The amount of wages subject to Medicare tax is the same as the wages subject to Social Security tax. The only difference is that there’s no $142,800 wage limit.
Box 6— Medicare Tax Withheld
Same concept as box 4.
Box 7— Social Security Tips
Report tips your employee reported. Include amount in boxes 1 and 5. Box 3 plus 7 shouldn't exceed $142,800.
Box 8— Allocated Tips
Only applies to large food or beverage establishments.
Skip Form W-2 box 9.
Box 10— Dependent Care Benefits
Include dependent care benefits. Amounts over $5,000 are taxable so include the excess in boxes 1, 3, and 5.
Box 11— Nonqualified Plans
Report nonqualified plan contributions like salary reduction plans. Include these in Form W-2 box 1.
Box 12— Codes
Include up to 4 codes on one W-2 form. For more codes, you’ll need another W-2 form. Put code on the left of the line, and the amount on the right. The code letter does not relate at all to the box's letter in Form W-2. For example, you can insert code B on box 12a.
Box 13— Checkboxes
Check the first box if you’re preparing Form W-2 for a statutory employee (a certain type of independent contractor).
Check “retirement plan” if you entered code D or E in box 12.
Check the third box if reporting sick pay payments made by a third party.
Box 14— Other
Use this box to report other information given to the employee (e.g., state disability insurance taxes withheld).
Boxes 15 Through 20— State and Local Specific
Complete if you have a state income tax. If boxes don’t apply to you, leave them blank. Need to report more than 2 states? If so, you’ll need a separate W-2 form.
Include your state ID number (state EIN) on box 15. For boxes 16-20, follow a similar process as boxes 1-4. Some wages may be exempt from federal income tax, but not state income tax, so boxes 16 and 1 may differ.
Smart Way to Simplify W-2 Forms
It’s always a good idea to have foundational knowledge about tax forms like Form W-2 in case an employee raises a doubt.
Once you know the basics, let payroll software do the rest. FreshBooks integrates with Gusto so you can easily keep track of your payroll expenses to make sure all employee taxes are ready for tax time.
More Resources on Small Business Accounting