If you were an employee, you’ll remember getting a tiny W-2 form annually to staple onto your tax return. A W-2 captures all your types of employee compensation and related taxes paid from the previous year.
If you have employees, you owe them an annual W-2 by January 31. For the year ending December 31, 2025, you may need to give this a bit of extra due diligence, as the OBBBA passed in July changed the tax rules mid-year.
What gets reported on a W-2?
A W-2 summarizes money earned, taxes already paid, and fringe benefits that might have tax implications. Categories include:
- Wages and salary
- Sick leave wages
- Federal and state taxes withheld
- Tips
- Overtime
- Commissions
- Heath benefits
- Retirement savings
- Deferred compensation
Special savings accounts and allowances, like dependent care and flexible spending accounts
Here’s the official list from the IRS.
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Some of this goes into standardized, numbered boxes. For everything else, there’s a catchall freeform box.
You go, Box 14. So brave.
What changed for 2025?
July’s OBBBA made two new W-2 tax categories: no tax on tips and no tax on overtime. Confusingly, this does not include all tips and all overtime, or even all workers.
It took a minute for the IRS to interpret the OBBBA, which meant that payroll companies weren’t able to update their software until November to collect these new tax report types.
As a result, if you have workers who received tips or overtime, you’ll need to review their qualifying income and manually update their 2025 earnings, back to January 1. Gusto has put together a good summary of what counts and where it goes on the W-2.
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The IRS also no longer accepts paper filings.
That means you’ll need to complete your W-2 run and submit it digitally by February 2, 2026. (The annual deadline is January 31, which falls on a weekend.) Most payroll services include W-2 preparation by default.
The government site SSA.gov will help you file up to 50 W-2s for free. While it’s free, it’s also cloogey, so you might want to pay to file through a commercial tax prep or payroll service.
When are my W-2s due?
W-2s must be filed with the IRS and distributed to your employees annually by January 31. When that date falls on a weekend, the deadline moves to the following Monday.
Your employees may elect to receive digital, paper, or both. You also need to distribute these by February 2.
What if I missed a category or made a mistake?
Inevitably, somebody on your team will report a missing or wrong number. If that happens, you can file an amended form W-2 C through your payroll provider or SSA.gov. Your employee will return the amended form with their tax filing.
What happens if I don’t file?
Kids, you do not want to play on the W-2s. Few tax areas are penalized more aggressively or swiftly. The 2025 penalties for not filing are $60 per form at 30 days, capped at $239,000 for small businesses.
The per-form amount goes up every 30 days, reaching $680 per form with no limit for “intentional disregard.” Make this a priority.
