The end of the year is coming to a close, and you know what that means: tax season is just around the corner. Whether you dread doing your taxes or enjoy them (and some people do!) the bottom line is that doing them every year is unavoidable.
If this is one of the first years you'll be taking on taxes yourself, it can be a bit overwhelming. There's a lot to learn. For example, you might need to know how to read a W2 to properly file with the IRS.
A W2 is a very important form when it comes to getting through this process. Read on and we'll walk you through what one is and how to read one.
What Is a W2 Form?
The W2 form is one of the most important parts of the tax process. It is a paper record of the wages an employee received from their employer during that tax year. You don't fill out a W2 form, you receive it in the mail from your employer.
An employer will send out the pertinent wage information to both you and the IRS as part of their own tax reporting. That's why it's not a good idea to try and fib about how much you've made or attempt to under-report your wages. The IRS will have their own copy and know how much your employer has paid you.
If you've only worked with one employer over the course of the year, you should only end up with one W2 form. However, if you work freelance or have worked with many different employers, you might end up with many W2 forms.
How to Read a W2 Form
All W2 forms should be more or less the same. They might look somewhat different, but they all contain similar information. A form should have your name and mailing address, as well as your social security number and your employer's identification number.
Somewhere on the form should be your total taxable wages for the year. This is the key number. But there should also be a list of wages that were withheld for various reasons: for federal taxes, for social security, for medicare, for state and local tax, and so on.
This can be helpful to reference if you want to see where your money has gone over the course of the year. You'll also use this information to help file your taxes, many tax-filing programs use this information to identify and record your W2 form.
If your employer has forgotten to get you a W2, they can employ an easy to use W2 generator to get you the information you need in time for the tax season.
Tackling Taxes Stress-Free
It can, of course, be overwhelming to have to do your taxes on your own. If you know how to read a W2 form, however, you're already well on your way to a successful filing. The above information should be of great help.
Need more personal finance advice? Check out the rest of our blog for more.