W-2 (Wage and Tax Statement)

Form W-2 reports an employee's annual wages and the taxes withheld from their paychecks. Employers must furnish W-2s to employees and file with the Social Security Administration by January 31 — the same deadline for both — with penalties per form that escalate the later the filing.

W-2 employees have payroll taxes (FICA, Medicare, federal and state income tax) withheld throughout the year. Employers pay the matching portion of FICA and Medicare on top. The employer's share is a cost of hiring, not a cost passed to the employee — a $100k W-2 employee actually costs the employer roughly $107,650 before benefits.

The 20+ boxes on a W-2 carry the tax return's numbers plus every fringe-benefit flag. Box 1 is federal wages (already reduced by 401(k) and pretax benefits); Boxes 3 and 5 are Social Security and Medicare wages (which don't get the 401(k) reduction); Box 12 codes carry every retirement contribution, HSA, group-term-life, and equity-comp event. Getting the Box 12 code wrong — a common S-corp shareholder-health mislabel or a missed RSU code — creates a return that reconciles wrong.

For owner-employees of S-corps, the W-2 IS the reasonable-comp evidence. IRS agents examining reasonable comp look at Box 1 first, then compare to industry benchmarks and time devoted. A W-2 that shows $30k of comp on a $500k profit business is the easiest recharacterization target in the code.

State copies matter separately. Multi-state employees typically get one W-2 per state where wages were sourced, and states with reciprocity agreements (PA/NJ, KY/OH, etc.) have simplified filing paths. The convenience-of-employer rule in NY, PA, and NJ can source wages to the employer's state even for a remote worker — the resulting mismatched W-2 needs an offsetting non-resident return and a resident credit.