W-2

What Does W-2 Mean?

A W-2 is a form issued by an employer to the Internal Revenue Service (IRS) that reports the amount of money withheld from an employee’s salary over the previous year for tax purposes.

Insuranceopedia Explains W-2

The tax withholdings reported on a W-2 form include those paid to both state and federal governments. It also covers all types of compensation, including tips received by the employee from customers. The same wage figures that appear on a W-2 are also what state insurance regulators use to calculate workers’ compensation premiums, so the form is a useful reference point for both employees and employers at tax time.

If an employer completes a W-2 form in 2017, it reflects income earned in 2016. The IRS compares the information on the W-2 form with the taxpayer’s tax return and will investigate any discrepancies between the two. Employees reviewing their W-2 are sometimes surprised by what does and doesn’t count as taxable income, and questions like whether life insurance payouts count as taxable income are common at this stage.