How to Prepare and File W-2s

A W-2 (Wage and Tax Statement) summarizes what each employee earned and what was withheld from their pay over the calendar year. You're required to prepare one for every employee, give them a copy, and file copies with the IRS and Social Security Administration, all by January 31 each year.

What You'll Need

Access to QBO Payroll (or your payroll software)
All payroll runs for the calendar year completed and finalized
Your employer EIN
Employee SSNs (confirm accuracy before filing, mismatches cause IRS rejections)

What Goes on a W-2

Each W-2 reports the employee's:

Box	What it is
Box 1	Total wages subject to federal income tax
Box 2	Federal income tax withheld
Box 3	Social Security wages (capped at the annual wage base)
Box 4	Social Security tax withheld (6.2% of Box 3)
Box 5	Medicare wages (no cap)
Box 6	Medicare tax withheld (1.45% of Box 5; does not include the 0.9% Additional Medicare Tax)
Box 16	State wages (California)
Box 17	California state income tax withheld
Box 19	Local income tax withheld (if applicable)

If you provided taxable benefits, personal use of a company vehicle, employer-paid group term life insurance over $50,000, etc., those amounts are included in Box 1 wages and must be calculated before W-2s are generated.

Normal Procedure

Step 1: Finalize the year's payroll

Before generating W-2s, confirm that all payroll runs for the year are processed and correct:

All regular pay periods completed
Bonuses, commissions, and irregular payments recorded
Taxable benefits calculated and added to wages
Any payroll corrections completed

Step 2: Generate W-2s in QBO Payroll

In QBO Payroll, go to Payroll Tax > Annual Forms > W-2.
Select the tax year.
QBO generates a W-2 for each employee based on the year's payroll records.
Review each W-2 for accuracy, confirm wages, withholdings, and employee SSNs.
If corrections are needed, adjust the underlying payroll first, then regenerate.

Step 3: File with the IRS and SSA

W-2s are filed with the Social Security Administration (SSA), which shares the data with the IRS. You also file a W-3 (Transmittal of Wage and Tax Statements), a summary of all W-2s, along with copies of each W-2.

Deadline: January 31 (to SSA and to employees simultaneously).

Option A: File through QBO

QBO Payroll supports direct e-filing to the SSA. Go to Payroll Tax > Annual Forms > File W-2s and follow the prompts.

Option B: File through the SSA's Business Services Online (BSO)

Go to ssa.gov/employer and file the W-2 data electronically. Required if you have 250 or more W-2s; strongly recommended for everyone.

Option C: Paper filing

Paper W-2s are permitted for employers filing fewer than 250 forms, but e-filing is faster and reduces errors. If filing on paper, order official forms from the IRS, photocopies are not accepted.

Step 4: File with California (EDD)

California requires employers to reconcile state payroll taxes annually. If you use QBO Payroll set up for California, the DE 9 and DE 9C quarterly filings already cover your state obligations throughout the year. There is no separate California W-2 filing, the EDD receives withholding information through the quarterly filings.

However, if you withheld California income taxes and there is a discrepancy, QBO Payroll's annual reconciliation tools can help identify gaps before they become EDD audit issues.

Step 5: Distribute W-2s to employees

Employees must receive their W-2 by January 31. Options:

Email a PDF (with employee consent)
Provide access through an employee self-serve portal in QBO
Mail a paper copy to the employee's address on file

Employees need their W-2 to file their federal and California state income tax returns.

Abnormal Procedures

You filed W-2s and then discovered an error.

File a W-2c (Corrected Wage and Tax Statement) for the affected employee through the SSA's BSO portal or through QBO. Provide the corrected copy to the employee. If the error affects California PIT withholding, the correction also flows through the EDD quarterly filings.

An employee left mid-year and you can't reach them.

You are still required to file their W-2 with the SSA and attempt delivery. Mail a copy to their last known address. Document the attempt.

You have an employee whose SSN doesn't match IRS records.

You'll receive an SSA mismatch notice. Ask the employee to verify their SSN and provide a corrected version. File a W-2c once the correct information is confirmed.

You paid someone as a contractor all year, and now you believe they should have been an employee.

This requires issuing a W-2 (not a 1099-NEC) and amending your quarterly payroll filings. This is a significant compliance issue, involve your NCO advisor before taking any action.

FAQ

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

A W-2 is for one employee. A W-3 is the employer's transmittal form that summarizes the totals from all W-2s filed that year. You file both together with the SSA. QBO Payroll generates the W-3 automatically.

Do I need to issue a W-2 if the employee earned very little?

If you withheld any federal income tax, Social Security, or Medicare from an employee's wages during the year, you must issue a W-2 regardless of the dollar amount. If no taxes were withheld and wages were below $600, a W-2 is technically still required for any employee, the $600 threshold applies to 1099s for contractors, not W-2s for employees.

What if an employee needs their W-2 early for a mortgage or loan?

You are not required to provide W-2s before January 31. You can provide a pay summary or year-end earnings statement to help with the application, but the W-2 deadline stays the same.

Can employees access their W-2s through the IRS website?

The IRS makes W-2 data available through the IRS online account portal, but typically not until late February or March. Your obligation to deliver the W-2 directly by January 31 is separate from when the IRS makes it available online.