The W-2 is a tax form that many people have to fill out every year when they are paid. The forms are used as a way to track how much income an employee has, and how much money they owe in taxes. The Internal Revenue Service will use the information to see if an employee has a large enough tax liability and will then assess a penalty.
Unfortunately, many people do not know what is on their W-2 or how to complete the W-9 properly. This makes it easy for the government to catch individuals who try to avoid paying taxes, or get people with large tax liens filed against them, and can be avoided by knowing what is on the W-2.
When completing the W-2, there are four basic sections that have to be completed. Some of these sections include:
* Income Statement – This is the most important section on the W-2 because it contains information about an individual’s income. It also includes information about any assets that the individual owns, and where those assets are located.
* Payables – This section contains a list of all of an individual’s debts and financial obligations. It may include bank account statements, store account balances, and other types of financial information. The amount owed on a specific debt can be shown on this section as well, which makes it easier for the IRS to see what a person owes.
* Retirement accounts – This section lists all of an individual’s retirement accounts. These include IRA’s, 401K’s, and other types of retirement plans. These accounts may list the type of account, the number of employees, the investment accounts held, and other information. These account balances will show how much money is being put into the retirement plans and how much is being withdrawn from the plans.
* Expenses – This section of the W-2 shows the type of expenses that a person has each year. These expenses can include payments on credit cards, medical bills, utility bills, gasoline, and other types of expenses that can be seen on a credit card statement. It will also show the type of payment made, and any tax withholdings that are being made.
* Other deductions – The second section of the W-9 is used to deduct any business expenses that a person can claim. This section can include taxes, business meals, home-office supplies, and travel expenses, and other types of expenses.
* Tax returns – The third section of the W-9 is used to show individuals how much money that they will have to pay the IRS before they get any of their tax refunds. This section of the tax return will show how many years the individual worked, and whether or not a person had any retirement accounts. As well, if a person is self-employed, he or she will need to show the information on the business.
* State tax return – The fourth section of the W-9 contains the information on the individual’s state tax return. This section is used to help the state government to see what a person is doing to pay his or her state taxes.
* Federal tax return – The fifth section of the W-9 is used to show an individual how much he or she owes on the individual tax return. and if any tax rebates were received. The fifth section is used to give information about an individual’s total assets, such as assets held in retirement accounts, and how much money that person has to pay off tax liens.
All of these sections will be used to help the IRS to make sure that an individual’s tax returns are in order. All of the information provided on a W-2 will be used by the IRS to help the government determine how much of an individual’s money needs to be paid out as taxes.
As you can see, completing the W-2 is an important task that needs to be completed when preparing one’s tax return. If you have ever had to submit a W-2, you will know that this is an important step that must be completed. handled carefully.
