Things You Need To Know About Form W-2 For Tax Year 2020

As an employer, getting back to work after the holidays, the first thing you must focus on is filing W-2s with the SSA. This may feel like such a tedious job right after the holidays, but if you have a checklist for W-2 and know, how to complete the form, it is easy. This article will guide you through the W-2 filing process for 2020. When you have this guide handy, you’re halfway done.

Let’s start with what Form W2 is, who should file it, and how to file it easily. This guide has answers to all the questions you may have about Form W-2.

IRS Form W-2 — Explanation

The IRS Form W-2 or Wage and Tax Statement is a report submitted by employers to the SSA every year. The W-2 shows the employee’s wages and the tax amount withheld from their paycheck. A copy of this form must also be sent to your employees.

As an employer, you should file it on or before January 31, 2021, for the tax year 2020. Be sure that you send W-2 copies to your employees by the end of January 2021.

Form W-2 Filing Requirements

If you have paid your employees wages of at least $600 & withheld taxes, you must file a W-2 with the SSA. Precisely, you are required to file W-2 for each employee that meets the following criteria:

• You have withheld Income, Social Security, or Medicare tax.
• You have withheld income tax if the employee has not claimed more than one withholding allowance or had not claimed exemption from withholding on Form W-4.

The process does not end once you have filed the W-2s with the SSA. You must also send copies of W-2 to the employees. In total, there are five copies for W-2 and listed below:

Copy A — Submit this to the SSA.

Copy 1 — Submit this to the state, county, or local municipality.

Copy B — Send this to the employee for filing with the federal tax return.

Copy C — Send this to the employee for record-keeping.

Copy 2 — Send this to the employee for filing with the state tax return.

Copy D — Have this copy for your records

Form W-2 Instructions

Filling out Form W-2 is a crucial step as it needs to be completed error-free. Even a small error may lead to penalties or rejection.

This section will definitely help you in completing W-2s for 2020. Let’s see what the Form W-2 looks like and all the boxes that need to be filled out:

Box a — Employee’s social security number

Enter the correct 9-digit number displayed on the employee’s social security card. If the employee does not have SSN, enter all 0s.

Box b — Employer identification number (EIN)

Enter the EIN given to you by the IRS. If you don’t have an EIN, enter all 0s, but do not enter your SSN.

Box c — Employer’s name, address, and ZIP code

Enter your business name, address, and ZIP code. Do not include commas or periods in return addresses.

Box d — Control number

This is an optional box to give an identification number to the return you file.

Boxes e and f — Employee’s name and address

Enter your employee’s name (First name, Initial, and Last name) as given in the Social Security card. Enter the complete address, including number, street, and apartment/suite number.

Box 1 — Wages, tips, other compensation

Enter the total taxable wages, tips, and other compensation you have paid to your employee. Don’t include elective deferrals subject to a section 401(k) or 403(b) plan except section 501(c) (18).

Box 2 — Federal income tax withheld

Enter the total federal income tax withheld from the employee’s paycheck. If there is 20% excise tax withheld on excess parachute payments made, include them too.

Box 3 — Social security wages

Enter the total wages paid that are subject to the employee social security tax. Do not include social security tips and allocated tips.

If you’re reporting for Household Employees, the sum of Social Security Wages and Tips must be equal to or greater than $2,200.00. If this sum is less than $2,200.00, enter zeros in the Social Security Wages & Social Security Tips boxes.

Note: The SSA will reject your W-2 if the sum is non-zero and less than $2,200.

Box 4 — Social security tax withheld

Enter the total employee social security tax withheld, including social security tax on tips. For tax year 2020, the amount should not exceed $8,537.40 ($137,700 × 6.2%).

Box 5 — Medicare wages and tips

Enter the total wages subject to Medicare tax. If you’re reporting for Household Employees, the sum of these wages must be equal to or greater than $2,200.00. If the total is less than $2,200.00, enter zeros in the Medicare Wages & Tips boxes.

Note: The SSA will reject your W-2 if the sum is non-zero and less than $2,200.

Box 6 — Medicare tax withheld

Enter the total employee Medicare tax withheld.

Box 7 — Social security tips

Enter the tips that your employee reported to you even if you did not have enough employee funds to collect the social security tax for the tips.

Box 8 — Allocated tips

If you’re operating large food or beverage establishments, enter the tips allocated to your employee.

Box 9 — Don’t enter anything

Box 10 — Dependent care benefits

Enter the total amount paid or incurred by you for your employee under a dependent care assistance program (section 129).

Box 11 — Nonqualified plans

Enter the distributions to your employee from a nonqualified plan or nongovernmental section 457(b) plan.

Box 12a — 12d (Codes)

Enter the codes that apply to you from 12a to 12d. There are 29 codes available to be entered in these boxes. Check out Form W-2 Codes here.

Box 13 — Checkboxes

• Check the Statutory employee box if the employee’s wages are subject to social security and Medicare taxes, but not subject to federal income tax withholding.
• Check the Retirement plan box if your employee is an active participant in any of the following.

1. A qualified pension, profit-sharing, or stock-bonus plan described in section 401(a) (including a 401(k) plan).
2. An annuity plan described in section 403(a).
3. An annuity contract or custodial account described in section 403(b).
4. A simplified employee pension (SEP) plan described in section 408(k).
5. A SIMPLE retirement account described in section 408(p).
6. A trust described in section 501(c)(18).
7. A plan for federal, state, or local government employees or by an agency or instrumentality thereof (other than a section 457(b) plan).

• Select the Third-party sick pay box if you are a third-party sick payer and filing a Form W-2 for an insured employee or an employer reporting sick payments made by any third party.

Note: Check the appropriate boxes that apply.

Box 14 — Other

You can use this box to enter the information related to the following:

• State disability insurance taxes withheld
• Union dues
• Uniform payments
• Health insurance premiums deducted
• Nontaxable income
• Educational assistance payments
• A member of the clergy’s parsonage allowance and utilities
• Charitable contributions made through payroll deduction

Box 15 — State Information

Enter your state and state Tax Identification Number

Box 16 — State wages, tips, etc

Enter the total amount of taxable wages that the employee earned in that state.

Box 17 — State income tax

Enter the total amount of state income taxes withheld from the employee’s paychecks for the wages reported in Box 16.

Box 18 — Local wages, tips, etc

Enter the wage amount subject to local or city income taxes.

Box 19 — Local income tax

Enter the total amount of taxes withheld from wages for local or city income taxes.

Box 20 — Locality name

Enter the locality name for which the tax is being paid.

Changes to Form W-2 and its instructions for 2020

If you’re familiar with the Form W-2, you might have noticed minor changes in it. Well, the IRS has made a few changes for 2020. Let’s discuss these new updates below.

• Box 9 is earmarked.
• You can now truncate the employee’s SSN on the employee copies. You must not truncate it in Copy A (SSA copy) at any cost.
• Award payments made to the employees compensating the working hours lost/missed due to the on-the-job injury are now subject to the Railroad Retirement Tax Act (RRTA). If you are a railroad employer and make such award payments to the employees covered under the RRTA, you must withhold Tier 1 and Tier 2 taxes.
• The IRS is now providing disaster tax reliefs for those affected by recent disasters.
• Penalties related to W-2 have been increased.

Learn more about Form W-2 Instructions.

E-filing — An Easy Way To File W-2 for 2020

The SSA accepts both paper filing and e-filing. However, e-filing is the safest and most convenient way to file W-2, considering the current pandemic situation. Nowadays, many employers are moving towards electronic filing. According to the IRS Data Book, around 89.1 percent of the taxpayers filed their returns electronically in 2019. Why don’t you try this year? We tell you why you should e-file W-2s below:

• Cost-effective
• Accurate and error-free
• Allows for tracking of the return status

If you don’t know how to get started with e-filing or want a better e-filing experience this year, TaxBandits is here! It is an IRS-Authorized e-file provider, supporting various federal forms.

Watch the below video to learn how to e-file Form W-2 with TaxBandits

You may wonder why you should try TaxBandits when multiple e-filing providers are available on the market. The answer is simple! TaxBandits offers intuitive features that will both simplify and speed up your filing process, check them out below:

Bulk Upload

Nobody wants to complete their W-2s one-by-one, this is a waste of your valuable time. That’s why our Bulk Upload feature was built! Using this feature, you can upload your employee details in a single batch. To upload the form details, you can either use your template or our TaxBandits bulk upload template. After uploading all your details, you just need to import the template into your TaxBandits account and continue to transmit your returns. This is definitely a time-saving feature for any business owners and tax professionals.

TIN Matching

To err is human, but you cannot take a chance on your tax returns. Small mistakes can lead to mishaps, and the most common reason for the rejection of W-2 is incorrect TINs. You can prevent this error when you e-file using TaxBandits. The application audits every TIN you enter in the W-2s to reduce the chances of rejection. If you have entered an incorrect TIN, those will be highlighted before transmitting to the SSA. Thus, you can resolve the error and enter the correct TINs.

Online Access Portal

Cost-cutting is one of the major benefits of e-filing. This feature lets you grant access to W-2 copies to your employees without having to distribute paper copies. The ultimate goal of TaxBandits’ Online Access is to provide contactless W-2s. While you file W-2s, you can send the consent to your employees for receiving W-2s online. Employees who accept the consent will be granted access to view and download their forms.

Federal and State Filing

For 2020, many states have mandated the filing of W-2. TaxBandits supports both federal and state filing of W-2. So, you don’t have to look for different e-file providers to complete federal and state filing. TaxBandits is a one-stop solution!

We hope this article helps you in completing your W-2s for 2020 and better understanding the perks of e-filing. If you would like to e-file, create a FREE account with TaxBandits, and stay compliant with the SSA and states.