IRS Form W-2: Reporting Employee Wages and Taxes as a Landlord

IRS Form W-2

The majority of Americans who work under an employer will be receiving a W-2 form this year. If you’ve filed taxes before, then you’ve likely seen a W-2 already; it’s the form that shows how much money you’ve made, as well as any taxes, social security, and Medicare income withheld. If you’re an employer—like a landlord—then you’ll need to understand the intricacies of W-2s, how to fill one out and who exactly to send one to. Below, we’ll dive into what landlords should know about W-2s, what to expect when filing them, and the differences between forms 1099 vs W2.

What is Form W-2?

One of the most widely used tax documents, the W-2 (also commonly known as the Wage and Tax Statement), is used to report wages earned by an employee for the past fiscal year. It outlines state and federal employment taxes withheld from wages by employers, and it’s one of the most important documents for filing your own taxes.

By law, W-2s are to be distributed by employers each year before January 31st. Submit this information to the IRS carefully and correctly—via tax software, CPA, by hand, etc.—and in return, you’ll likely be able to see some of your tax dollars back. Taxpayers report their W-2 data by filling out a 1040 form when filing.

Who Should File/Receive a W-2?

Any individuals who earn more than $600 a year from their employer must receive and report their W-2 data before the federal tax deadline (around April 15th every year). The IRS specifies that all employees meeting this criterion, including relatives, friends, and part-time employees, must receive one. So even if your daughter works for your family-owned rental property business part-time or at minimum wage, you must provide a W2 for tax and legal purposes. Failure to file taxes may result in penalties, fines, and other serious repercussions, so it’s very important that you file and/or postmark your forms before the deadline.

Contracted employees or independent contractors, however, are not considered eligible to receive a W-2—instead, they receive a 1099 form. The employment status of these individuals is a little different, so their forms and filing processes is different.

1099 vs W2

W-2s are often confused with 1099s, since both are tax forms that report one’s yearly earnings. However, the situations in which they are used differ. W-2s are for employees of a company, while 1099s are for non-employees (like independent contractors).

If someone is contracted, then they’ll receive a 1099-NEC (Nonemployee Compensation) form instead of a W-2. Freelancers, independent contractors, and contracted employees are the most typical recipients. As a landlord, for example, if you acquire business expenses by contracting maintenance personnel for odds-and-ends jobs around the property, you’ll need to provide them with a 1099-NEC. This will outline their compensation earned as well as any taxes withheld from their wages (which is not as common for non-employees, but be sure to research your local laws).

1099-NECs follow the same general threshold: If you pay a non-employee $600 or more in the tax year, then you must provide them with one. Non-employees may work for you periodically throughout the year but generally aren’t salaried or on a regular payroll.

What Information Do I Need to Complete a W-2?

To create a W-2 form, you’ll need information pertaining to each of your employees, including but not limited to their social security and address. Information like this is typically collected on a W-4 form, which is to be completed by employees upon hiring and/or personal and financial changes. It’s also important that you keep careful and close track of your employees’ earned incomes and tax withholdings so that tax season doesn’t catch you and your books by surprise.

Note: As an employer, it is your responsibility to withhold taxes and benefits for your W-2-receiving employees. For additional guidance on the withholding process, the IRS provides step-by-step withholding instructions and tables on their website.

Components of a W-2

On the W2 form itself (seen on the 2024 version), there’s a series of boxes filled with the tax and wage-related data that you’ll report. This data pertains to the past fiscal year, meaning your 2024 W-2 will reflect your 2023 wages.

As previously mentioned, your W-2 will contain your wages and your withholdings—federal and state tax, social security, and Medicare—as well as allocated tips and dependent care benefits. It’ll also contain identifying information such as your social security number, your employer’s identification number (EIN), and your employer’s state ID number. If anything looks out of the ordinary, it’s important that employees reach out to their employers immediately so that the issue can be resolved.

How to Report Wages with a W-2

Many landlords are also employers. You may have a salaried property manager, maintenance staff, or other individuals who work for your rental property business part-time or full-time throughout the year.

If so, you’ll need to provide your employees with their W-2 by no later than January 31st so they have ample time to file their taxes. Many services for managing payroll taxes will automatically generate W-2s for each of your employees, which can help you as an employer by saving time and automating the process. You can also order tax forms from the IRS website and fill them out yourself or hire a professional (like a Certified Public Accountant) to do it for you. No matter the avenue you choose, be sure to abide by all tax guidelines and regulations.

To fill out a W-2, you must:

• Locate all the necessary information. This will include social security numbers, tax-related employer information (Employer identification number, Employer state ID number, address, and zip code), as well as all other information pertaining to boxes 1-20 (employee wage information, withheld taxes, allocated tips, local income tax, etc.). This should all be somewhere secure, such as a physical safe or password-protected folders.
• Fill information into the appropriate boxes (or have someone else do it for you). It’s typically best to fill boxes out alphabetically, then chronologically. As an employer, you will send Copy A (in red) to the SSA and Copy B (in black) to your employee.
• Distribute the W-2s. As mentioned above, this can be done in a variety of ways. It’s important that you send Copy B of each W-2 to the corresponding employee before January 31st and Copy A to the SSA before the tax deadline (for 2024, April 15th).

Note: If you incorrectly fill out information at any time, be sure to fill out the “VOID” box at the top left of the form. If a void form has been mistakenly sent to an employee, be sure to send both the voided copy and the correct copy to the SSA when filing taxes.

Conclusion

W-2s are one of the most commonly received and distributed tax forms, so understanding them both as an employer and an employee is crucial. Though you may have business aspects of taxes at the forefront of your mind as a landlord, it’s vital that you take care to properly handle each W-2 for your employees. Equipped with the information provided above, you’ll be ready with any W2-related curveballs that this tax season may throw your way.

 

Disclaimer: Ledgre does not provide tax or legal advice. All information and materials available on this site are for general informational purposes only. Contact a tax professional for advice with respect to a specific tax matter.