Avoid Tax Penalties with Five W-2 Tips from the American Payroll Association
The 2020 Form W-2, Wage and Tax Statement, is due to all employees by February 1, 2021. It is important for all taxpayers to review their Form W-2 carefully, to ensure accurate taxes and social security earnings. This is especially true in 2021, due to new regulations inspired by the COVID-19 pandemic.
The American Payroll Association, the nation’s leader in payroll education, has five tips to ensure your Form W-2 is accurate this tax season.
The form includes all wages and benefits received in 2020. Qualified sick leave wages and family leave wages, including the Families First Coronavirus Response Act (FFCRA) wages, must be reported on Form W-2, Box 14, or on a separate statement.
You might receive an extra W-2 this year. You should receive a Form W-2 from every employer you worked for throughout 2020. If your employer deferred the employee share of social security tax on wages from September 1, 2020, through December 31, 2020, you will receive a Form W-2c, Corrected Wage and Tax Statement.
Compare your W-2 to your final 2020 paystub.
Items to review on the Form W-2:
Box 1 will differ from your final 2020 paystub year-to-date gross pay if you participated in a 401(k) or other employer-sponsored savings plan.
The Box 3 total should not exceed $137,700, which is the 2020 social security wage base limit.
Boxes 1, 3, and 5 will be different from your final 2020 paystub year-to-date gross pay if you used pre-tax dollars to pay insurance premiums or for transit benefits, or to contribute to flexible spending accounts.
Don’t overpay your taxes. Your 2020 Form W-2 contains information to help determine if you need to fill out a new Form W-4, Employee’s Withholding Certificate. Adjusting your W-4 form can result in fewer taxes taken from each paycheck, giving you an instant raise.
Complete a “paycheck checkup” using your Form W-2 by filling out the IRS’s Tax Withholding Estimator to determine if you’re overpaying your taxes.
Check for tax credits. Depending on your eligibility, you may qualify for thousands of dollars from the Earned Income Tax Credit. Read the back of the Copy B of Form W-2 to determine your eligibility.
For additional tips and resources, visit www.americanpayroll.org. The American Payroll Association is the nation’s leader in payroll and accounts payable education, publications, and training.
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