What Is a W-2 Form and Why You Need It

Finally, you’re ready to be a homeowner. Yay!

You’ve saved up a sizeable down payment (if taking out a mortgage) or the entire amount (if buying in cash). Your credit score is in the right place. Generally, everything is looking up.

You can’t wait to move into your own home.

Just one little detail left to sort out, though: the house size.

Picking a house size might seem like an afterthought, but it’s one of the biggest decisions you’ll make when you’re looking to buy a home. The size will, in fact, impact the cost of the home and your overall experience. Get it wrong and you’ll find yourself in the market after a couple of months or years.

So, how do you choose the right size? Here’s how:

Your Current Living Needs

Of course, you want a house that meets your current living needs.

If you’ve got a family, for instance, you need a house with an adequate number of bedrooms and other facilities that will support the family.

If you’ve got one car, you need a house with at least a parking spot for the car. If you’ve got two rides, you need one with enough space for the cars.

Your Future Living Needs

While it’s natural to take your current living needs into account, some prospective homebuyers forget to factor in their future living needs.

If you’re a growing family, for example, or you plan to have more kids in the future, you need to go with a house size that can accommodate your growing family needs. It should have additional bedrooms or if not, have enough space where you can build an extension.

If you’re a car collector, you’ll probably add more cars to your collection. You need to buy a home with a big garage or outdoor space where you can park your cars.

What if you don’t know what your future looks like? Perhaps you don’t quite know whether you want to marry and have kids or not. Well, it’s advisable to err on the side of caution. It’s better to buy a bigger house that you won’t need in the future than buy a small house that will need upsizing.

Your Homeownership Plans

Is the home you’re buying your forever home or you plan to upgrade later on?

If you have the answer to this question, it’s easy to determine how much of a house you need right now. You’ll start looking at houses for sale knowing exactly what you need.

For instance, if this is your first home and you plan to upgrade later on in life, you can do with a house that suits just your current living needs. But if it’s your forever home, it’s important that you buy a house that will satisfy you today and in the future.

Choose the Right House Size

The home buying process is exciting, so exciting that you might end up with a house that doesn’t suit your needs. To avoid this from happening, it’s important to have a good handle on the house size you need. With this guide, you now know how to choose the right size.

Keep reading our blog for more homeownership tips.

If you’re a business owner and you’re confused about your taxes, you’re not alone.

Mistakes can be costly, so we take a look at what a W-2 Form is, why it’s important, and how to fill one out.

W-2 Form

A W-2 tax Form is a required document if you deduct taxes from your employees from their paychecks. An employer should send their employees and the IRS a W-2 Form at the end of each tax year if this is the case. It reports the annual wage and the amount of tax deducted.

Who should fill out a W-2 Form? Both employees and employers need to fill these forms out. If you hire independent contractors or self-employed workers, you do not need to send them a W-2 Form.

Employees should be sent their W-2 Forms by January 31 each year and require 3 copies. One is used for reporting their federal income taxes, one is used for reporting to the relevant local or state agency, and one is the employee’s own records.

As an employer, you will use a W-2 Form to report to the FICA throughout the year. You will also need a W-3 Form at the end of the year for SSA; who will use the information to calculate any benefits a worker is entitled to.

Information

So what does the W-2 Form tell you? Along with an employees annual salary and tax deductions (federal, Social Security, and Medicare) it should include a number of other details:

• The employee’s Social Security number (box A)
• The employee’s name and address (boxes E and F)
• Your details as the employer
  • Employer notification number (box B)
  • Name of the company
  • Address of the company (box c)
• Any tips or additional compensation
• Dependent care benefits (box 10)
• Nonqualified retirement plan compensation

If you use a control number for your payroll, it will go in box D. The names and addresses used much match what is on the employee’s Social Security card or your business mailing address.

Box 1 will contain the employee’s total taxable wages, and box 2 should have the tax withheld. Box 3 is the employee’s total Social Security tax (boxes 3 and 7 combined) and box 4 Social Security tax withheld.

Boxes 5 and 6 detail the employee’s Medicare wages and tax withheld. Box 7 contains Social Security tips, and box 8 is for tips from hospitality businesses.

Box 9 is not used, and box 11 is for the SSA to check if anything from boxes 1,3 or 5 was earned in a previous year.

Box 12 is for items represented by codes A to EE. As an employer, if you need to list more than 4 codes, you must use an additional W-2 Form.

The form can look quite overwhelming, but there are generators online that can help you create and fill in your W-2 Form in simple steps. Find more info here.

Find Out More

Now you know what a W-2 Form is, who should fill out a W-2 Form, and what it tells you. Find more great business articles on the rest of our site for anything from sales and marketing to finance and accounts.