How to Pay Employees with W-2

Some employers decide that the best way to pay their business’s employees with W-2 is with an hourly wage. Issue IRS Form W-2 for each of your employees on an annual basis. Fill out every applicable employee’s name, address, gross wages, and the amount of income taxes withheld from the wages. Send employees a copy of the form each January for the previous year. File a separate copy to the Social Security Administration.

Step 1 – Collect employee information (names, addresses, Social Security numbers, wages, tax withholding statuses).

Step 2 – Order or generate however many W-2 forms that you need. Do not print out any of the informational forms located on the IRS’ website for use.

Step 3 – Enter the previous year’s total hourly wages for your employee. Input the federal taxes withheld from their wages. The third and fourth sections are dedicated to Social Security wages and withholdings. Enter Medicare wages, tips, and withholdings in the fifth and sixth sections of the form. Finish the form by reporting any tips to the SSA.

Step 4 – Include your state’s tax information (the abbreviated state name, your state ID number, and the total paid state wages and taxes). Enter local wages, tips, and withholdings afterwards.

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Software Solutions from AMS

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