← Back to Glossary
W-2 Employee
Definition
A W-2 employee is a worker employed by a company who receives a W-2 tax form reporting wages, tips, and taxes withheld during the year.
Explanation
W-2 employees have taxes withheld from each paycheck by their employer, including income tax, Social Security, and Medicare. They receive a W-2 form each January summarizing their annual earnings and withholdings. Employers pay half of Social Security and Medicare taxes.
Benefits of W-2 employment include employer-paid taxes, eligible for unemployment benefits, workers' compensation, and often health insurance and retirement benefits.
Example
A W-2 employee earning $50,000 has about $3,825 withheld for Social Security and $1,175 for Medicare, plus income tax based on their W-4 elections.