How Do I Make a W-2 for an Employee? (w/Examples) + FAQs

You make a Form W-2 by totaling one employee's full-year wages and tax withholding, then filing those numbers with the Social Security Administration. You also give the employee a copy before the deadline. Miss a step and the IRS penalty climbs to $340 per form, so accuracy and timing both matter.

Every employer who withheld any tax, or paid a worker $2,000 or more this year, must file a W-2. You send it to the SSA and hand the employee a copy by February 1, 2027. That covers a solo owner's first hire, a household employer's nanny, and a growing team on payroll software alike. This guide walks through each box, the SSA's free filing tool, and the mistakes that trigger penalties.

What a Form W-2 Reports to the Government

This guide reflects federal payroll rules for the 2026 tax year, current as of July 2026. Wage thresholds and Social Security limits adjust for inflation most years. Congress can also change them mid-year, as the 2025 One Big Beautiful Bill Act did for tips and overtime rules. Confirm current figures on IRS.gov and loop in a payroll provider or accountant before you rely on any dollar amount here.

Form W-2, the Wage and Tax Statement, reports one employee's total wages for the year. It also reports every dollar of tax you withheld from those wages. The Social Security Administration uses those same numbers to set the employee's future Social Security and Medicare benefits, so a wrong box can shrink a retirement check years later. Alongside every W-2 you file, you also submit one Form W-3 that totals all your W-2s into one transmittal.

A W-2 differs from a Form 1099 because it covers only employees, not independent contractors. An employee is a worker whose hours, tools, and methods you control. The form carries six numbered boxes for federal wage and tax data, plus state boxes and a coded box 12 for benefits like retirement plans. Getting the employee-versus-contractor call right first matters most, since misclassifying a worker can trigger back taxes long before you fill in a single box.

Every employer required to file a W-2 must also register with Social Security's Business Services Online system. You need this even if you plan to file on paper, because BSO also checks employee names and Social Security numbers against government records. That check catches typos before they turn into penalties, and it takes only a few minutes for a small team. Skipping it will not stop you from filing, but it raises the odds of a rejected wage report months later.

Who Needs a W-2 From You

Federal law requires a W-2 for any worker you paid $2,000 or more during the year. That is a new threshold: IRS rules raised it from $600 for wages paid after 2025. You must also file one for any employee you withheld even one tax dollar from, no matter how little you paid them overall. Those two triggers, the dollar threshold and any withholding at all, cover nearly every employer with a part-time worker.

Only a narrow set of workers fall outside both triggers. This mainly covers certain election workers and foreign agricultural workers paid under $2,000 with no tax withheld. Household employers face the same $2,000 rule, so hiring even one nanny means filing a Form W-3 alongside that single W-2. If you are unsure a worker counts as your employee, treat anyone whose schedule you control as staff, not a contractor.

Federal rules set the wage and tax boxes on every W-2, but states differ on what else the form must show. Does my state differ? Most states with an income tax require a copy through boxes 15 through 17. Nine states, including Texas, Florida, and Washington, skip state income tax withholding entirely and leave those boxes blank.

Check your state department of revenue before you file, since some states also require a separate state reconciliation form. A handful of cities and counties layer on their own local wage tax as well, reported in boxes 18 through 20. Confirming this once, when you first hire in a new state, saves a scramble every February afterward.

A common point of confusion is whether an owner-employee of their own S corporation needs a W-2. The IRS treats a shareholder who works for the business as an employee for payroll purposes. Reasonable pay still runs through a W-2, even when the owner also takes separate profit distributions. Skipping this step to save on payroll taxes is a commonly flagged pattern in small-business audits.

A seasonal or gig worker adds one more wrinkle worth naming here. Paying a summer intern $2,300 for ten weeks of work still crosses the $2,000 mark, so a W-2 is required even though the job never becomes permanent. Treat every worker on your own payroll schedule, seasonal or not, as a W-2 candidate first, then rule it out only if the pay and withholding both stay under the thresholds above.

Which Situation Applies to You?

Not every employer files a W-2 the same path. The right approach depends mostly on team size, your tools, and whether anyone left partway through the year. Four situations cover almost every officeconsumer reader: a first hire, a growing team, a household employee, and a worker who left mid-year. Find the one that matches and skip to the boxes and deadlines that apply to you.

If This Is Your First Employee

A single new hire is the simplest case, and Social Security's BSO tool fits this volume well. You can create and print up to 50 Forms W-2 online at no cost. The system also generates the matching Form W-3 once you finish. Register with a login.gov or ID.me account first, since SSA retired the old BSO username-and-password sign-in.

Gather your Employer Identification Number, the employee's Social Security number, and their full-year wage totals before you start. The online form does not reliably save partial entries between sessions. Filing this route takes most first-time employers under an hour once the numbers are ready. If you would rather skip the tax boxes, payroll apps built for solo owners will file the form for a flat per-employee fee.

If You Already Run Payroll for a Team

Once you file 10 or more information returns in total, counting W-2s alongside 1099s, federal law requires e-filing rather than paper. Most payroll platforms handle this step automatically. They pull each pay run's totals into the W-2 boxes and transmit the batch to the SSA for you. The threshold counts every return you file that year, not only W-2s, so eight 1099s plus five W-2s already crosses it.

Larger teams also benefit from BSO's file-upload feature, which accepts one formatted wage file instead of separate forms. That path suits any business filing more than 50 W-2s, since form-by-form entry gets impractical past that volume. Whichever method you use, verify Social Security numbers in bulk through BSO's free service before you file, since one mismatched name can bounce the entire batch.

If You Have a Household Employee

Hiring a nanny, a home health aide, or a housekeeper makes you a household employer once you pay that worker $2,000 or more in a year. You still file a W-2 and a matching Form W-3, checking the household-employee box so the SSA reads it correctly. Household employment taxes are then reported on Schedule H of your personal Form 1040, not a business payroll return.

Many household employers are surprised this rule applies even to one part-time babysitter once pay crosses $2,000 for the year. You need your own Employer Identification Number for this, separate from your Social Security number, before BSO will let you file. Skipping the EIN step is the top reason a first-time household employer's W-2 gets rejected.

If an Employee Left Mid-Year

An employee who quit or was let go in March still gets a full W-2 for everything earned that year, not a prorated form. You may furnish it any time after their last paycheck, but no later than the standard February 1, 2027 deadline everyone else gets. If that former employee asks for their copy sooner, give it within 30 days of the request or the final wage payment, whichever comes later.

Final paychecks sometimes include accrued vacation pay that changes the wage totals after payroll software already ran its last report. Recalculate the boxes by hand in that case instead of trusting an old auto-generated total. A departed employee's forwarding address is worth confirming before February, since a returned envelope starts a four-year recordkeeping duty for the undelivered form.

Step-by-Step: How to Build the W-2

Every W-2 follows the same six-step sequence, whether you use free government software or a paid payroll platform. The steps below match the order SSA's BSO tool walks you through, screen by screen. Skipping ahead, like adding box 12 codes before you confirm gross wages, is where most data-entry errors start. This holds whether you work from a blank W-2 form or inside payroll software.

Box 1 holds total taxable wages, tips, and other pay. It excludes pretax retirement contributions like a 401(k) deferral, but includes signing bonuses and most fringe benefits. Box 2 is the federal income tax you withheld over the year, a figure that should already match your payroll register. Boxes 3 and 5 report Social Security wages and Medicare wages separately, because Social Security wages have an annual cap while Medicare wages do not.

Box 4 shows the Social Security tax you withheld, at 6.2% of box 3 up to the annual cap. Box 6 shows Medicare tax withheld, at 1.45% of box 5 with no cap at all. An employee earning above $200,000 also owes an extra 0.9% Additional Medicare Tax past that line, though you owe no matching employer share of it. Boxes 15 through 20 close the form with state and local tax detail, which varies by where the employee worked.

Once every box is complete, file Copy A with Form W-3 through BSO, or mail paper forms to the SSA's processing center in Wilkes-Barre, Pennsylvania. Send Copies B, C, and 2 to the employee by the same February 1, 2027 deadline. You can mail them, hand them over, or use a secure electronic portal the employee has agreed to. Keep Copy D and your own W-3 copy for at least four years, since the IRS can request them during an audit.

Never send cash, checks, or any payment along with the paper forms you mail to the SSA, since that address only handles wage data, not tax remittances. If you use certified mail, the SSA asks you to adjust the ZIP code shown on its instructions, a small detail that keeps the envelope from bouncing back. Route any employment tax payment, like a Form 941 deposit, to the IRS separately instead.

A Worked Example: Building One Employee's W-2

Maria owns a five-person marketing agency and is filing a W-2 for her employee Jordan. Jordan earned a $62,000 salary plus a $3,000 signing bonus in 2026, and had $500 in group-term life insurance value above the $50,000 exclusion. Jordan also put $2,000 pretax into a 401(k), which cuts box 1 but not boxes 3 and 5, and had $8,200 in federal tax withheld for the year. Maria's payroll register already tracks these numbers, so her task is transferring them into the right boxes.

Maria starts from Jordan's $65,000 in cash wages. She subtracts the $2,000 pretax 401(k) deferral to land on box 1, then adds back the $500 taxable value of the group-term life insurance above the $50,000 exclusion. Box 3 and box 5 skip the 401(k) subtraction, because elective deferrals still count as Social Security and Medicare wages even though they escape federal income tax. Multiplying $65,500 by 6.2% and by 1.45% produces the withheld tax in boxes 4 and 6, both well under the $184,500 Social Security wage cap for 2026.

This example simplifies a real payroll run, which would also weigh state withholding, pretax health premiums, and software rounding. Treat the math here as the mechanics behind the numbers, not a swap for your payroll system's own calculation, since one missed pretax deduction can shift every box after it. When your own software disagrees with hand math like this, trust the software's year-to-date register over a one-time manual check.

Jordan's numbers stay well under the Social Security wage cap, but a higher earner changes the math in one specific spot. Once wages cross $184,500 for 2026, box 3 stops growing and locks at that ceiling, while box 1 and box 5 keep rising with every paycheck. Employers who forget this cap sometimes over-withhold Social Security tax late in the year, which then requires a refund to the employee rather than a simple box correction.

BSO Versus Payroll Software: Picking the Right Tool

The SSA's Business Services Online system is free, government-run, and the safest default for a business filing 50 or fewer W-2s a year. It builds the matching Form W-3 for you and checks each Social Security number as you type. Paid payroll platforms fold W-2 creation into the same subscription that already runs your paychecks, so the wage boxes fill from data the software already holds. The trade-off is control versus convenience: hand-entry costs nothing but your time, while a subscription costs a monthly fee but removes the transcription step.

Small-business payroll platforms target the same size range BSO does, generally under 50 employees, and usually e-file the batch as part of the subscription. Enterprise-tier platforms serve teams large enough to already trip the 10-return e-filing rule, adding features like multi-state tax mapping a five-person shop rarely needs. Choosing the enterprise tier for five W-2s a year buys features you will never use. Staying on manual entry past 50 employees invites the mistakes the software exists to prevent.

Before you pay for any platform, sanity-check your own math with SSA's free AccuWage tool. It flags formatting and Social Security number errors in a wage file before you submit it. This catches the same class of mistakes a paid service catches, without a subscription, as long as you can assemble the file yourself. Reach for a paid platform once manual entry regularly costs more of your time than a subscription would.

Switching tools mid-year carries its own cost worth weighing first. Moving to a payroll platform in November means re-entering the year's wage history, since the new platform never saw the earlier pay runs. Most small employers find it easier to finish the current tax year on whichever tool they started with, then switch at the next year's start.

Deadlines, Penalties, and Corrections

Every 2026 W-2 is due to the SSA and your employee on the same date: February 1, 2027. That date holds whether you file on paper or electronically. Missing it does not leave you guessing, since the IRS publishes an exact penalty for every stretch you run late. The chart below shows how fast the per-form cost climbs once you slip past the first 30-day window.

File within 30 days of the deadline, and each late or wrong W-2 costs $60. That penalty caps at $698,500 a year for most businesses, or $244,500 for a small business. Wait past 30 days but file by August 1, and the penalty rises to $130 per form.

Filing after August 1, or skipping the form entirely, brings the top penalty to $340 per form, the ceiling the IRS instructions set for 2026 filings. These figures apply to filings due after 2026, and they adjust for inflation most years. Confirm the current amount before you budget for a late batch, since small-business caps run lower.

The IRS waives the penalty when you can show reasonable cause. That means the failure came from something outside your control, and you can show you acted responsibly once you noticed it. An honest mistake, like a transposed Social Security number, gets fixed with a Form W-2c rather than a fresh W-2.

You must e-file that correction if the original W-2 required e-filing. Waiting for an employee to flag the error is not a sound plan, since the same per-form penalty applies regardless. A quarterly check of your wage register against payroll totals catches most of these mistakes before February arrives.

A returned or bounced e-file also starts its own clock. Treat a rejection notice from the SSA as unfiled, not corrected, and resubmit as soon as you fix the flagged field. Waiting even a week to act can push a same-day fix into the next, more expensive penalty tier.

Three Employers, Three Lessons

The situations above cover the mechanics of filing. These three, drawn from filing patterns common among small and mid-size employers, cover mistakes that surface only once the paperwork is already moving. Each one teaches a different lesson about a common failure point in the process.

David Learns Tip Income Still Needs Careful Boxes

David runs a 12-person restaurant where servers report cash and card tips through his point-of-sale system every shift. When he built their W-2s, he first assumed box 1 only needed the hourly base wage. He then learned that reported tips belong in boxes 1, 3, 5, and 7, not as a separate line item. For 2026, he also enters each server's Treasury Tipped Occupation Code in the new box 14b, a field added this year.

David's misconception, that tips are a bonus tracked outside the wage boxes, is common enough that the IRS spells out the difference in its own instructions. Underreporting tips in boxes 3 and 5 shortchanges the server's future Social Security benefit. It also understates David's own matching FICA bill, which the IRS can catch in a routine employment tax audit. He now checks a tip report against his point-of-sale totals every quarter, instead of rebuilding a year of tip data in January.

Priya Converts a Contractor to an Employee Mid-Year

Priya hired a designer as a 1099 contractor in February. By June, she realized she was setting the designer's hours and reviewing every deliverable, the two factors that define an employee, not a contractor. She switched the designer to W-2 status starting with the July payroll. That meant two tax documents for one person in the same year: a 1099-NEC for the contractor months, and a W-2 for the employee months.

The common misconception is that a mid-year switch requires amending the earlier 1099 or merging the two forms into one. It does not. Each form correctly reports the pay earned under that classification, and both go to the same worker for the same tax year without conflict.

Priya's real risk sat in those first five months, since the IRS can assess back payroll taxes on wages that should have been W-2 pay from the start. She now writes up each new hire's control test before choosing 1099 or W-2 status, instead of defaulting to a contractor label because it is easier to set up. That one-page checklist takes ten minutes and now heads off the same mistake for every new hire.

A Rejected Wage Report Teaches an EIN Lesson

A small nonprofit's bookkeeper filed 40 W-2s through BSO's file upload, only to have the entire batch rejected two weeks later. The cause was one mismatched character between the EIN on the wage file and the EIN on file with the SSA, left over from a legal name change. BSO checks the EIN against every form in a batch, so that one bad character stalled every W-2, not only the one tied to the name change.

The fix was simple: correct the EIN in the file header and resubmit the batch, since a rejected file was never processed and needs no Form W-2c to undo. The lesson reaches past this one nonprofit: confirm your EIN against your latest IRS notice before any bulk filing, especially after a name change or a new provider. A five-minute check against an old tax notice would have caught the mismatch before 40 forms sat in limbo for two weeks.

Mistakes to Avoid

• Using the wrong tax year's form. Filing a 2025 W-2 template for 2026 wages can misalign box 12 codes and the new box 14a/14b split, and the SSA rejects mismatched form-year submissions outright.
• Reporting net pay instead of gross wages in box 1. Box 1 needs pretax deductions already removed but taxable fringe benefits added back, and take-home pay instead understates wages and can trigger an IRS notice.
• Forgetting to file Form W-3 with paper W-2s. The transmittal form is mandatory even for one employee, and the SSA holds an unmatched batch of W-2s without it, delaying processing for everyone in the batch.
• Missing the e-filing threshold. Filing 10 or more information returns on paper instead of electronically draws its own penalty separate from any error on the forms themselves, even if every box is correct.
• Leaving the corrected box unchecked on a W-2c. A correction filed without marking it as a correction can register with the SSA as a duplicate wage report instead of a fix, inflating the employee's reported earnings.
• Sending Copy A to the employee instead of the SSA. Copy A is for the government only, and an employee who files with Copy A instead of Copy B or C risks a rejected tax return.
• Not verifying Social Security numbers before filing. An unverified SSN typo bounces the wage report and can misapply an employee's earnings to the wrong Social Security record, a mistake that can take years to unwind.
• Ignoring the household employer's separate timeline. A nanny or caregiver's W-2 follows the same February 1 deadline as any other employee, and treating household payroll as informal paperwork for later invites the same per-form penalty as a business filing.

Do's and Don'ts

Do

• Register for BSO early, since the login.gov identity verification step can take a day or two to clear before you can file anything.
• Reconcile your W-3 totals against Form 941 for the year, because a mismatch between the two is one of the most common SSA rejection triggers.
• Keep four years of W-2 and W-3 copies, including any that were undeliverable to a former employee, in case of an IRS inquiry.
• Confirm each employee's legal name and SSN exactly as it appears on their Social Security card, not a nickname or a maiden name still on file.
• Set a mid-December checkpoint to pull preliminary wage totals, giving yourself weeks to fix a data problem before the February deadline arrives.

Don't

• Don't wait until deadline week to start, since a rejected e-file batch needs time to diagnose and resubmit before the penalty clock resets.
• Don't guess at a departed employee's forwarding address, because a returned envelope starts a four-year recordkeeping obligation you can avoid with one phone call.
• Don't combine two employees' wages onto one W-2, even for a married couple who both work for you, since each person needs their own form under their own SSN.
• Don't add company logos or ad slogans to employee copies, a practice the IRS explicitly prohibits because it makes a W-2 look like promotional mail an employee might discard.
• Don't assume a payroll platform's W-2 is error-free, since software carries forward whatever wage data you entered all year, including any earlier misclassification.

Pros and Cons of Filing Your Own W-2s

Pros

• No subscription cost. BSO's online form-by-form filing and W-3 generation are free for up to 50 employees.
• Direct control over accuracy. You see every box before submission instead of trusting a platform's automated mapping.
• Built-in SSN verification. BSO checks employee names and numbers against SSA records at no extra charge.
• No vendor lock-in. You are not tied to a payroll subscription you would otherwise need only for this task.
• Faster for a very small team. One or two W-2s often take less time to hand-enter than to configure inside a new payroll platform.

Cons

• Time cost scales badly. Entering 20 or more W-2s by hand takes meaningfully longer than a platform that pulls data from payroll already run.
• No year-round wage tracking. BSO only builds the year-end form, so you still need a separate system tracking pay all year.
• Manual math invites errors. Hand-calculating boxes 3 through 6 raises the odds of a transposition mistake a platform would catch automatically.
• Correction process is manual too. Fixing a mistake means filing a paper or online W-2c yourself instead of a platform reissuing it.
• No integrated state filing. BSO handles the federal W-2 and W-3 only, leaving state Copy 1 submission as a separate task.

What to Do Next

1. Confirm which of the four situations above, first hire, growing team, household employee, or a departed worker, matches your case.
2. Gather your EIN, each employee's SSN, and full-year wage and withholding totals from your payroll register.
3. Register for SSA's Business Services Online with a login.gov or ID.me account if you have not filed there before.
4. Fill in boxes 1 through 6 first, then the state, local, and box 12/14 detail, checking each figure against your payroll totals.
5. File Copy A with Form W-3 by February 1, 2027, and furnish Copies B, C, and 2 to every employee by the same date.
6. If a number changes after filing, prepare a Form W-2c rather than a fresh W-2, and loop in an accountant if the correction touches prior-year taxes.

Frequently Asked Questions

Do I need a W-2 for a part-time employee?

Yes. Any worker paid $2,000 or more this year needs a W-2. So does anyone you withheld any tax from, full-time or not.

What happens if I file my employee's W-2 late?

The penalty starts at $60 per form. It climbs to $130 after 30 days, then to $340 after August 1 or for forms never filed.

Can I hand-deliver a W-2 instead of mailing it?

Yes. Hand delivery works if the employee gets their copy by the deadline. Secure electronic delivery works too, with the employee's written consent.

Do I need a W-2 for myself as a sole proprietor?

No. A sole proprietor takes an owner's draw reported on Schedule C, not a W-2. An S corporation owner who works in the business generally does need one.

What should I do if a new hire has no Social Security number yet?

File using all zeros in the SSN field, then submit a Form W-2c once the employee's number arrives, rather than delaying the entire W-2 past the deadline.

Is there a fee to file through SSA's Business Services Online?

No. BSO's online W-2 creation, W-3 generation, and Social Security number verification are free for any employer, regardless of company size.

How long should I keep copies of filed W-2s?

At least four years. The IRS and SSA can both request copies during that window, and undeliverable employee copies carry the same four-year retention rule.

Do independent contractors get a W-2?

No. A contractor who invoices you and controls their own hours gets a 1099-NEC instead. Issuing a W-2 to a contractor can itself trigger a misclassification review.

What should I do if I discover an error after I already filed?

File a Form W-2c, the correction form, rather than a duplicate W-2, and e-file the correction if the original W-2 was required to be e-filed.

Does a bonus paid in December still need to appear on the W-2?

Yes. Any bonus, prize, or award paid during the calendar year belongs in box 1 regardless of size, timing, or whether it was a one-time payment.

Can I e-file if I only have two employees?

Yes. E-filing is optional below the 10-return threshold. BSO's free tool works for any employer, so you can e-file with two employees even though it is not required.

What is the difference between Form W-2 and Form W-3?

Form W-2 reports one employee's wages; Form W-3 totals every W-2 you filed. You submit exactly one W-3 per employer per year, even if you only have a single employee.