The Internal Revenue Service (IRS) is divided into four operating units, one of which is the Wage and Investment Division. This division processes all 2020 1040 Individual Income Tax Return forms and associated documents. According to the IRS Data Book, in 2019, the service processed Federal tax returns totaling more than $253.0 million, collected $3.5 trillion in gross taxes, and issued $452 billion in refunds.
Exploring the W-2 Form
Employers use the 2020 IRS W-2 Wage and Tax Statement to report the salary, wage or other compensation that it paid to employees. With this form, an employer notifies the IRS of the taxes it withheld from an employee's pay and deposited in a Federal Reserve Bank on behalf of the U. S. government.
At the end of the year, an employer sends the W-2 forms – one for each employee – as well as the related W-3 Transmittal of Wage and Tax Statement to the IRS. Simultaneously, the employer sends copies of the W-2 forms to its employees. On receipt, employees use the W-2 to file their tax returns.
The data in the W-2 forms alert the IRS to the total dollars the employer paid to its employees in the form of wages, tips or other compensation. Also, the forms report the federal income tax, Social Security tax and Medicare tax that the employer withheld from employee wages and forwarded to a federal reserve bank.
Read More: What Is Included in Federal Income Tax
Understanding the W-4 Form
An individual's completion of the 2020 IRS W-4 Employee’s Withholding Certificate is the first step in the tax reporting process for the employee and the employer. It's also one of the first documents processed by the IRS Wage and Tax Statement division.
You complete IRS W-4 Form and give it to your employer when you start a new job or request an adjustment of the tax that's withheld from your paycheck. Your entries on the form determine the amount of money your employer deducts from your paycheck and forwards to the federal reserve bank. In addition, it alerts the IRS of factors related to your personal or financial situation, such as dependents and deductions, which affect the amount that should be withheld from your check.
Because the W-4 form determines the money that your employer deducts from your paycheck, take your time and accurately complete the form. Otherwise, the IRS may send you a bill for the difference between the cash withheld from your check and the amount your employer should have deducted. If too little cash was deducted from your paycheck, the IRS might assess a penalty on the amount due.
If you're hired in 2020, you must complete the new 2020 W-4 form. The new version of the W-4 accounts for all sources of your income including what you earn from your primary and second jobs as well as self-employment wages and dividend and interest income.
Read More: How Do Income Taxes Work?
IRS Wage and Investment Division
The Wage and Investment Division confirms the validity of the IRS W-2 and W-4 forms as well as all the tax-related forms it receives from you and your employer. It does so by reviewing the submitted forms on the basis of the Revenue Act of 1978.
The taxes you pay on income, interest, dividends and other cash flows are essential sources of revenue for the U. S. federal government. What's more, the taxes you pay may represent a major portion of your income. Because of the significance of taxes to both you and the government, it's important that you become familiar with the IRS W-2 and W-4 forms as well as other forms and documentation that are central to the accurate filing of your tax return.
- IRS.gov: Returns Filed, Taxes Collected & Refunds Issued
- IRS.gov: 2020 Form W-2
- IRS.gov: Wage & Investment Division At-a-Glance
- IRS.gov: 2020 Form W-3
- IRS.gov: Depositing and Reporting Employment Taxes
- IRS.gov: 2020 Form 1040
- IRS.gov: 2020 Form W-4 Employee’s Withholding Certificate
- Finance.senate.gov: Revenue Act of 1978.
<!--StartFragment-->Billie Nordmeyer is an IT consultant of 25 years standing. As a senior technical consultant for SAP America and Deloitte Touche DRT Systems, a business analyst, senior staff, and independent consultant, Billie has worked across the retail, oil and gas, pharmaceutical, aeronautics and banking industries. Billie holds a BSBA accounting, MBA finance, MA international management as well as the Business Analyst and Software Project Management certificates from the Cockrell School of Engineering at the University of Texas at Austin.<!--EndFragment-->