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Your 2021 W2 - What should you look out for?

In today's video, Sanjiv Gupta CPA talks about your 2021 W2's.  You should have received those or might be receiving them soon.  You should pay close attention to your W2 to ensure all the information is correct and you are not missing something important.

Your W2 tells IRS a lot of information about you. For example:

1. How much did I make last year and how many hours did I work?

You'll find both of these numbers on your new hire paper, which will likely be handed to you during orientation. If it's not, don't worry because you can get this information off of your check stubs or direct deposit slips (see below). You should also get the number of hours you worked each pay period i.e. hourly, daily, weekly etc.

2. What was my hourly wage? What is my overtime rate?

Your employer should include this information on your new hire packet or you can find it on your check stubs or direct deposit slips if they included that for you as well.

3. How much was taken out for taxes?

This information should be included on your check stubs or direct deposit slips. Additionally, this information should have been sent to you in a W2 form after your employer calculated how much they needed to take out for taxes and other deductions. In order to find your total payment amount minus the amount is taken out for taxes use your new hire packet or check stubs/direct deposit slips.

4. How does this work with overtime pay, bonuses, etc.?

If your employer pays you additional money for working over a certain number of hours or on the weekends then they will likely include that information in the taxable income section of your W2. They might also include it as part of your hourly wage and/or check stubs. Additionally, bonuses will also be included in the taxable income section of your W2 so you can find out how much was paid out for that as well.

5. Why do I have 1099 instead of a W2?

W2's are typically handed out by an employer to their employees only. If you are a business owner or self-employed you will likely receive 1099 from your employer instead. Since you're responsible for paying the taxes on your income, you must report all of it to the IRS when tax season comes around even if none of it was reported by your employer.

6. Why should I take my employer's word for it on how much to report as income?

The last thing you want is a nasty letter from the IRS challenging your tax returns because they believe you're under-reporting your income. It's always a good idea to double-check everything and make sure that all of the information matches up with what you've reported.

7. What are business expenses?

Business expenses are a broad term that means any costs that you incur from being self-employed or from running a business. These can include vehicle-related expenses such as gas, oil changes, car washes, repairs, tolls, etc., home office costs, and deductions for your business's utilities. This information should have been included in your box of receipts or in your vehicle logbook. If it wasn't, you can also find this information on your canceled checks.

8. Why does my paycheck stub say reimbursement for gas & Tolls? Can I claim this as a deduction from my taxes?

Because this was not included in your gross income or W2 then technically no, you cannot claim this on your taxes.

9. How often should I check to make sure my W2 doesn't have an error or missing information?

You should make sure your W2 has no errors every time you get it sent home with you, especially before you send in your tax return(s). If you do find an error, contact your employer immediately and request that they mail in a corrected W2 form. You can then fill it with your 1040 tax return(s).

10. I quit my job last month but haven't received my final paycheck yet, can I still file my taxes?

If you've worked for any part of even one day then you are required by law to file your taxes. You can submit an estimated tax payment for last month if you haven't worked the entire month but it must be done within 4 years of filing your tax return or 3 years from the date that the IRS sent your refund check, whichever is later.

11. I've lost my check stubs and my employer says they don't have any copies; do I still need to file my taxes?

Yes, you will still need to report your income and pay the appropriate amount in taxes. However, if possible try and get a copy of the W2 from your previous employer because it would make filing your tax return(s) much easier.

12. If I didn't make any income this year, do I still need to file my taxes?

Yes, if you worked even for just one day then you are still required by law to file your tax return(s) and report your income. You can also apply for an "exempt" status which would allow you to not have to file your tax return(s) and would provide you with a refund of all the taxes that you've paid during the year. If you do submit an exempt request, it must be done no later than three years from filing your last tax return or by April 15th of the next year (whichever is later).

13. My W2 doesn't have any information on it, can I still file my taxes?

Yes, employers are not required to provide you with all the necessary income information if you claim less than $400 in income for the year. However, you must still report whatever amount of income that you did make in order to avoid receiving letters from the IRS.

14. I'm a contractor and my employer is withholding taxes from me, I have no deductions that would reduce my taxable income. Is this going to be a problem when I file?

Yes, if you do not show any deductions at all on your W2 then you will most likely receive a letter from the IRS asking to submit proof of your deductions.