Small Block

Capital Absorption Risk · Labor

W-2 Employees, Salaried, and Hourly Payroll

Definition

Wages and salaries paid to a business's employees, from which the employer withholds income tax and reports annually on Form W-2; payroll is a recurring operating cost absorbed before profits. Employers must pay covered employees at least the federal minimum wage and overtime at one and one-half times the regular rate for hours beyond the weekly limit[1], must withhold income tax from wages[2], and must furnish each employee an annual wage statement[3] and file Forms W-2 by January 31[4].

Federal law

  1. Fair Labor Standards Act of 1938, Act of June 25, 1938, ch. 676, §§ 3(g), 6, 7, 52 Stat. 1060 (29 U.S.C. §§ 203(g), 206, 207). Created the federal minimum wage and overtime requirements (29 U.S.C. §§ 206-207). Official text: govinfo.gov, U.S. Government Publishing Office.
  2. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 3402, 68A Stat. 3 (26 U.S.C. § 3402). Requires employers to withhold income tax from wages (26 U.S.C. § 3402). Official text: govinfo.gov, U.S. Government Publishing Office.
  3. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 6051, 68A Stat. 3 (26 U.S.C. § 6051). Requires employers to furnish employees annual wage statements, the basis of Form W-2 (26 U.S.C. § 6051). Official text: govinfo.gov, U.S. Government Publishing Office.
  4. Protecting Americans from Tax Hikes Act of 2015 (Consolidated Appropriations Act, 2016, div. Q), Pub. L. 114-113, div. Q, title II, § 201, 129 Stat. 3076 (26 U.S.C. § 6071(c)). Set January 31 as the filing deadline for Forms W-2 and W-3 (26 U.S.C. § 6071(c)). Official text: govinfo.gov, U.S. Government Publishing Office.