A document that indicates employee’s gross income and federal tax deductions produced annually by the employer is referred to as W-2 income statement. It is a requirement by the federal government that the employers send W-2 income statements to their employees and revenue authorities before the set deadlines usually by 31st January each year. To file the correct file returns, an employee must identify the amount of tax which has been gradually with held by the employer throughout the financial year as indicated in the W-2 statement. The amount of money withheld in an employee’s W-2 income statement is subject to refund or can be subtracted from the tax due. It is of note to employees and employees that failure to submit the W-2 income tax to the internal revenue service attracts heavy penalties.
A summary of the employee’s social security and Medicare earnings and their taxation according to the social security administration is clearly indicated in the W-2 income statement. The W-2 income statement has several boxes each of them containing different information thus the employee finds it easy to read and understand the content of the document.It is easy for the revenue authorities to identify employees who are tax liabilities through the information contained in their W-2 income statements. W-2 income statement is also used to proof the legitimacy of the employees’ income which can be applied in lawsuits and in granting of federal financial aid in institutions of higher learning by the social security administration.
It is the responsibility of every employee to file annual tax returns accompanied with a W-2 income statement as this makes it possible to audit the tax return easily. W-2 income statement is essentially a breakdown of the withheld federal tax of the employer by the employee to the internal revenue service. The information in the W-2 income statement acts as a backup for the employers to evaluate any possible divergence and enquire for the necessary modifications. W-2 income tax contains the employee’s and the employer’s information for identification purposes. The statement is structured in such a way that it features all types of income the employee is subjected to.
Payment of tax a constitutional responsibility of every individual entitled to a pay slip therefore, W-2 income statement cannot be ignored by either the employee or the employer. Employees have the liberty to transmit the W-2 income statement received from their employers to the internal revenue service through e mail addresses. Ignorance is no excuse thus employees should take an initiative to ensure that they clearly comprehend the W-2 income statement.