How Does Having Multiple W-2s Affect Your Taxes?
At the end of every tax year, most workers receive W-2s from their employers showing their earnings for the year. In certain situations, some workers will receive multiple W-2s. While receiving multiple W-2s may result in extra work at tax time, it does not necessarily portend an increase in taxes owed, although this will prove to be the case in some instances.
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Purpose of W-2s
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Form W-2 is a wage and tax statement that employers have to send to the federal government to report the wages and salaries paid to their employees. Copies must also be sent to employees by January 31st of the year following their payment. Only workers designated as employees receive W-2s; freelancers or independent contractors receive form 1099-MISC instead.
Receiving Multiple W-2s
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If you work as an employee for more than one employer, you should receive one W-2 from each employer. You may also receive more than one W-2 if you work in more than one state, as your employer will generally divide your income out to the state in which it was earned.
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Increased Paperwork
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In any situation where you receive more than one W-2, your paperwork burden at tax time will be increased. As each W-2 you receive is also reported to the IRS by your employers, your tax return must match the information already reported. You should list all of the information on your W-2s on your tax return, including wages and salaries paid, income tax withheld, and the name, address, and other personal identifying information for each employer.
Resident and Non-Resident Returns
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If you receive multiple W-2s by virtue of working in more than one state, you may have to file multiple state income tax returns as well. Usually, even if you are not a state resident you must report income earned in a state, particularly if your employer divided your income by state into multiple W-2s. Tax filing rules vary from state to state, but most states require you to file a non-resident or part-year resident return if you are paid wages in their state.
Factors Possibly Increasing Tax Liability
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Multiple W-2s can result in increased tax liability since each individual employer may withhold taxes at a lower rate. For example, if you earn $30,000 from each of two employers, they might each withhold tax at the $30,000 tax rate when your true combined income places you in the $60,000 tax bracket. Additionally, if you earn income in more than one state, you may owe higher state taxes in one of the states.
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- Photo Credit A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com
