W2 Processing

W2’s are an important document created for your employees that allow them to complete their income taxes. There are a number of settings and options that can affect how the Accounting Manager arrives at the numbers that get included on the W2 form.

A W2 is created for any employee who has received a payroll check during a given calendar year, even if they are no longer marked as an active employee in the Employee Information window. The state and federal taxes calculated are dependent on correctly setting up the employee and their number of deductions, filing status and any extra incomes or deductions that affect their pay.
An extra income that gets added to an employee’s paycheck is subject to payroll taxes if it is considered part of their wage or salary. If it is an expense reimbursement or other non-taxable amount, taxes shouldn’t be calculated based on this extra amount. Whether an extra income is subject to taxes is determined by the setting on the income codes window, and can be overridden for each employee when it gets added to the income tab of their employee information window. If subject to taxes, this extra income will be included in the reported wages for this employee on their W2 form.

A deduction can affect the amount of taxable wages reported on the W2 for an employee, also. On the deduction codes window, a deduction can be marked to be subtracted from wages before certain types of taxes get calculated. This setting can be overridden when the deduction gets added to the employee’s deduct tab of their employee information window. The most common type of deduction that gets subtracted from wages before taxes are calculated is an IRA/401k deduction, since that money is generally taxable when it is received by the employee later.

Once a W2 file has been built, it can be reviewed by running the W2 summary report, under the Reports> Payroll Reports menu. This allows you to easily verify information, spot missing social security numbers, etc., before printing the W2 forms. If any changes need to be made to any calculated numbers, it can be done under the Modify W2 File option of the Reports> Payroll Reports menu. There will be a record for each employee for each year, so be sure you’re changing the correct record if any manual changes are made! Use the List button on the toolbar to locate the record you wish to change.

The W2 formats included in the system are designed to fit most standard W2 forms that are set up to hold two forms per page. Depending on printer settings, it may be necessary to slightly re-position some of the fields that print on the W2 form. This can be easily done under the Utilities> Check Setup> Payroll Check and W2 Setup menu. Once the format is on the window, the field that needs to be moved can be clicked on once, which will place black handlebars around it. Once that is done, the arrow keys on the keyboard can be used to move that field up, down, left or right as needed. The format simply repeats when printed on the actual forms. Therefore, if the second W-2 is printing too low on the page, simply click on the gray Detail bar, and drag it up slightly in the W-2 modification window. This will cause the second W-2 form to print higher on the page, when printing the actual W-2s. Once changes are made, be sure to save it under the File Menu before exiting to try printing again. Until you’re sure that the W2s will line up with your pre-printed forms, you can print them on blank paper to compare with your existing forms.