Small Business Guide to Form W-2 and Form 1099-NEC – Part 2: Reporting Wages and Filing Form W-2 for Employees

Part of your responsibilities as an employer include managing payroll taxes for your employees, such as withholding federal taxes, paying the company’s portion of federal, state, and local taxes, and reporting income and payroll taxes on Form W-2.

The IRS generally defines an “employee” as an individual who performs services for an employer who, in turn, controls how and what work is done.

"[Classification] depends on the employer's responsibilities," says Thereasa Herald, G&A Partners' payroll tax director. "If the employer sets work hours, supervises work performance, sets the pay rate, and provides facilities, tools, and supplies needed to perform job duties, then the worker should be classified as a W-2 employee."

Additionally, W-2 employees typically:

• Receive net wages or salary after the employer has withheld federal income tax, Social Security, and Medicare tax under the Federal Insurance Contributions Act (FICA).
• Receive employee benefits, such as health insurance, retirement, and disability.
• Are eligible to receive unemployment compensation after a layoff or termination and workers’ compensation benefits for a workplace injury.
• Are covered by federal and state wage and hour laws, such as Fair Labor Standards Act (FLSA).
• Often work at the employer's place of business.

What to Know About Reporting Wages for Employees

Your business must file IRS Form W-2, known as a "Wage and Tax Statement,” for each employee to whom you paid $600 or more in wages for services performed during the year or to whom you withheld any income, Social Security, or Medicare tax during the year. The W-2 reports an employee's income from the previous year and the amount of tax the employer withheld.

W-2s must be provided to your employees—in person, by mail, or online—so they can report their total wages and other compensation, as well as the income tax withheld, on their federal income tax returns and state and local, if applicable. Employers must also file W-2s with the Social Security Administration (SSA).

Who receives a W-2

• Individuals working for someone else’s business who use the employer’s materials, tools, and equipment to perform their duties.
• Employees whose employer decides what, how, and when work will be performed.

Key Information on Form W-2

• Employee’s Social Security number, name, and address.
• Employer Identification Number (EIN) and address.
• Total amount of employee’s wages, taxes withheld, and benefits (other compensation).
• Total amount of federal income tax withheld.
• Total amount of Social Security wages and tips and Social Security tax withheld.
• Total amount of Medicare wages and tips and Medicare tax withheld.
• Total amount of dependent care benefits.

Employer Obligations

• Ensures information included on each employee’s Form W-2 is based on wages paid during the calendar year. For example, wages paid in January 2026 for work performed in December 2025 would not be included on the 2025 Form W-2.
• Distributes Form W-2s (Copy B) to each employee by January 31.
• Sends a copy (Copy A) of each employee’s W-2 form to the SSA by February 2.
• If required, sends a copy (Copy 1) to relevant state, city, or local tax departments.
• Keeps copies (Copy C) of W-2s and Form W-3s for at least four years.

Employee Responsibilities

• Monitors mail, email, or online sources for W-2 forms (Copy B), typically around January 31. (Contact your employer or HR department by early February if you have not received one.)
• Reviews the W-2 for correct name, Social Security number, and address; verifies income and withholding amounts; and checks Social Security and Medicare wages and taxes.
• Contacts employer to report errors and request a corrected W-2 (Form W-2c).
• Uses information on W-2 to complete federal income tax return (Form 1040). If applicable, uses the state and local wage and tax information to complete state and local tax returns.
• Retains W-2 copies for records for at least three years from the date tax returns are filed.

How to File Form W-2 for Business Owners

To help your business organize and process information and identify mistakes promptly, the IRS provides recommendations for W-2 filings. Here’s an overview of the process.

Step-by-Step Guide to Filing W-2s

1. Gather Data for Forms W-2

Begin by gathering relevant employer/employee information that is needed to populate each box on the W-2, including:

G&A TIP: Using payroll software and maintaining accurate, organized records can help reduce the amount of time this step takes. It’s also helpful to ask employees to verify their personal information (such as their address) toward the end of the year to ensure those details are up to date.

2. Prepare W-2s for Filing and Distribution

Employers are responsible for completing Forms W-2, filing them with the Social Security Administration (SSA), and distributing forms to employees.

• Each Form W-2 includes multiple copies to complete:
• Copy A: Submit to the SSA.
• Copy B: Provide to employees to file with federal tax returns.
• Copy C: Retain for your records.
• Copy 1: Submit (if applicable) to state, city, or local tax entities.
• Copy 2: Provide to employees to file with state, city, and/or local tax returns.
• Employers with nine or fewer employees may manually or electronically complete W-2s. However, if completing the forms manually, ensure the information is legible and clear since the IRS reviews W-2s digitally.
• Employers with 10 or more employees must complete the forms and file electronically.
  

G&A TIP: Late or incorrect W-2s can result in penalties ranging from $60-660 from the IRS. Utilizing a provider with payroll outsourcing services and an integrated HR technology system, like G&A Partners, can streamline the W-2 process, reduce errors, and save time.

3. Distribute W-2s to Employees

The deadline to provide W-2s to your employees is January 31 of the following year. Mark this date on your calendar to avoid missing this important deadline. Distribute copies B, C, and 2 of the Form W-2 to employees by hand, mail, email, or online through a secure portal.

G&A TIP: To furnish W-2s to your employees electronically, you must first obtain their consent. Many HR technology systems, such as G&A’s technology platform, allow employees to easily consent through a self-service portal.

4. Distribute W-2s to the Social Security Administration

January 31 of the following year is the deadline to submit Copy A (with W-3) to the SSA.

• Prepare Form W-3 (Transmittal of Wage and Tax Statements), which summarizes the total wages and taxes for all W-2s your business is submitting. The totals on your W-3 must match the cumulative totals from all the W-2 filings.
• Submit W-2s (Copy A) and W-3 to the SSA.

G&A TIP: The SSA website provides helpful resources and guides to help you through the W-2 filing process, whether you’re filing paper forms or electronically.

5. File With Applicable State and Local Tax Agencies

• Each state and potentially some local governments have their own requirements for W-2 filing (Copy 1). Follow your state and local tax agency's specific instructions for submitting W-2 information.
• State and local deadlines often align with the federal January 31 deadline, but always verify with the relevant tax agencies.
• Ensure your state employer ID number is correctly listed on the W-2 (box 15).

6. Retain Records:

• Keep copies of all W-2s, W-3s, and any filing confirmations for at least four years, including copies provided to employees and copies filed with the SSA and state/local agencies.
• If you discover an error after filing, you must file a corrected W-2 (Form W-2c) and a corrected W-3 (Form W-3c) with the SSA and provide the corrected W-2c to the employee.

How G&A Helps Businesses With Form W-2

Simplify payroll tax compliance for W-2s and more with a professional employer organization (PEO) like G&A Partners. Our online, integrated payroll technology automates deductions, prepares your tax payments, and generates reports. And gain peace of mind knowing you have a team of HR and payroll tax experts supporting you through the entire tax process. Schedule a consultation today to learn more.