How to Prepare a W‐2 for an Employee

July 31, 2026 Lord AI Editorial Team

Preparing W-2 forms is a year-end payroll reconciliation project. The form should be the final result of accurate payroll throughout the year, not an attempt to reconstruct wages during the last week of January.

Use the official instructions for the wage year because thresholds, wage bases, codes, electronic filing rules, and deadlines can change.

Quick Answer

Validate employer and employee identifiers, reconcile annual payroll and tax returns, complete each wage base correctly, review special compensation, file with the Social Security Administration, furnish employee copies, and retain the evidence.

Confirm Who Requires a W-2

Prepare Form W-2 for each employee whose compensation and withholding meet the filing rules. Do not issue a W-2 to an independent contractor merely because the contractor worked regularly; worker classification is based on the relationship and applicable law.

Reconcile the employee roster to payroll records, including terminated employees, deceased employees, household employees where applicable, and employees paid through multiple locations or payroll systems.

Validate Employer Information

Use the correct employer name, address, Employer Identification Number, and state or local account numbers. The employer information should match federal and state registrations and payroll tax returns.

Resolve mergers, common-paymaster arrangements, successor employers, and agent reporting before producing forms.

Validate Employee Identity Data

Match the employee’s legal name and Social Security number to reliable onboarding records and correction procedures. Do not use a nickname or an ITIN in place of an SSN for Form W-2 reporting.

Ask employees to review addresses before year-end, but remember that a delivery address change does not authorize changing the legal name or SSN.

Reconcile Annual Payroll

Reconcile total wages, federal income tax withholding, Social Security wages and tax, Medicare wages and tax, tips, dependent-care benefits, retirement-plan indicators, and state and local data to payroll registers and tax returns.

Investigate differences before filing. The totals transmitted with Form W-3 should agree with the aggregate W-2 forms and the relevant employment tax returns, subject to documented timing or correction items.

Complete the Wage and Tax Boxes

Area	What to review
Box 1	Federal taxable wages after applicable pre-tax adjustments
Boxes 3 and 4	Social Security wages and employee Social Security tax, limited by the annual wage base
Boxes 5 and 6	Medicare wages and tax, including additional Medicare withholding where applicable
Boxes 12 and 13	Required coded items and retirement or statutory-employee indicators
Boxes 15–20	State and local employer IDs, wages, and withholding

Do not assume Boxes 1, 3, and 5 will be equal. Certain benefits and deferrals affect the wage bases differently.

Review Special Compensation

Check taxable fringe benefits, group-term life insurance, third-party sick pay, tips, qualified retirement contributions, nonqualified deferred compensation, moving benefits where taxable, equity compensation, and other special items.

Coordinate with benefits, stock administration, accounts payable, and outside payroll providers so off-payroll taxable benefits are included before year-end close.

Furnish and File on Time

For 2026 wages, the W-2/W-3 filing deadline falls on February 1, 2027 because January 31 is a Sunday. Confirm the current-year instructions and state deadlines before filing.

Furnish employee copies using permitted paper or electronic methods. Electronic delivery requires compliant consent and access procedures.

File Electronically When Required

Federal e-filing rules generally aggregate information returns when determining whether the electronic-filing threshold is met. Employers filing ten or more covered information returns are generally required to file electronically unless a waiver applies.

Use SSA Business Services Online or an authorized payroll provider, protect credentials, and retain submission confirmations.

Correct Errors Properly

Use Form W-2c and W-3c for corrections when required. Correct the employee copy and government filings consistently, and amend related payroll tax returns if the error affects reported taxes.

Do not delete or overwrite the original audit trail in payroll software.

Retain Records and Protect Data

The IRS instructs employers to keep copies of W-2 and W-3 forms and related records for at least four years. Retain source payroll reports, reconciliation workpapers, delivery evidence, and correction records under the organization’s policy.

Limit access because W-2 files contain identity and compensation data that are attractive to criminals.

Writer’s Opinion

The most effective W-2 control is a quarterly reconciliation, not a January emergency. I would compare payroll registers, Forms 941, tax deposits, state returns, and general-ledger wages every quarter, then run a year-end preview before the final payroll.

Small employers often overlook benefits paid outside payroll. Build a year-end questionnaire for company vehicles, life insurance, equity, relocation, reimbursements, and other fringe benefits so they are evaluated before the last payroll.

Frequently Asked Questions

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

W-2 reports wages and taxes for an individual employee. W-3 transmits aggregate W-2 information to the Social Security Administration.

When are W-2 forms due?

The ordinary deadline is January 31, adjusted for weekends and legal holidays. For 2026 wage forms, the official instructions identify February 1, 2027.

Can I email a W-2 to an employee?

Use a compliant electronic-delivery process with consent, secure access, and required disclosures. Ordinary unencrypted email creates serious privacy risk.

What if the employee’s address is wrong?

Correct the delivery record and provide the form. An address change alone generally does not require W-2c if the government filing is otherwise accurate, but follow current instructions.