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W-2 Filing Available for All Businesses and Individuals
We are pleased to announce that all businesses and individuals can now file W-2 forms with Zenwork. If you previously received a letter from the Social Security Administration (SSA) regarding electronic wage report submissions, please note that the issue has been fully resolved. Our systems are fully operational, and we are processing W-2 and W-2C filings without any disruptions.
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If you’ve filed a W-2 for your employees, you must be aware of the taxes withheld for each of them based on their wages. W-2 form requires you to report certain taxes by filling out the Boxes 1-20.
These include taxes such as Federal taxes, Social Security tax, Medicare taxes as well as state and local tax withheld. However, state and local taxes should only be reported with certain states and local governments.
There are also some rules to report the state and local taxes on W-2.
So, what are the W-2 state and local tax withholding rules? Why do state and local reporting matter?
In this blog, we’ll give you a detailed dive into W-2 state tax withholding and local tax withholding requirements.
State and local governments use data from W-2 form such as employee wages, federal taxes, and state and local taxes to check that taxes you withheld are correct. To report the state and local taxes, payers need to fill in Boxes (15-20) in W-2.
However, if the information in these boxes does not match with the payroll and IRS records, you could get notices from them or even penalties.
Thus, it is important to report the correct state and local taxes withheld in order to avoid heavy penalties and keep your payroll records clean. Correct reporting in the mentioned W-2 boxes also protects the business from certain compliance problems.
Just like Box 2 in W-2 reports federal taxes withheld, Boxes (15-20) report state and local taxes withheld. Based on the taxes, you need to fill out each of these boxes.
Let’s break down each of them:
Box 15: State and Employer state ID number
Use this box to fill in the employer’s state and state ID number. Each state has a two-letter abbreviation, which you should fill under the state box. For example, use CA for California and NY for New York.
Also, the state ID number is a unique number that state assigns to each business. This number is associated with the state in which business operates.
Box 16: State wages, tips, etc.
This box shows the total taxable wages earned by the employee in that state. Usually, this is the same as the wages reported in Box 1 except in states where certain benefits are taxable.
Box 17: State income tax
Box 17 shows the amount of state tax withheld from the employee’s paycheck after each year. This is the amount that you have paid as a tax to the state government on your employee’s behalf.
Box 18: Local wages, tips, etc.
If the city or county in which the employee is located collect taxes, you’ll need to fill in the box 18 and 19 as well. Box 18 reports the total employee wage that is taxable at the local level. In most cases, this amount is the same as Box 16 and Box 1.
Box 19: Local income tax
Box 19 reports the local taxes withheld by the employer from the employee’s paycheck. This is the tax that the employer has paid to the local tax authority of the employee.
If the local taxes don’t apply to employee’s location, you should leave Boxes 18 and 19 blank.
Box 20: Locality name
This box reports the name of the local city or code to which you have paid the taxes. It is important because different localities might have similar names, so this ensures the tax gets credited to the right place.
Before the employer reports these boxes in form W-2, it is important to know the rules for reporting. Below, we have laid out these rules in detail:
Not all states require income tax but they require reporting.
Some states like Texas, Florida, Washington, Nevada, South Dakota, Wyoming, and Alaska do not levy a state income tax. However, if you’re paying the employee in these states, you’d still need to report their wages in Box 16.
Thus, state authorities can keep track of their employment rates using this information.
Each state defines “taxable wages” differently.
What counts as taxable at the state level may not always match federal rules. Also, different states have different taxable wages. The tax you pay depends on the income tax rates in your state.
For example, states tax retirement contributions (like 401(k) deferrals), even though they are excluded from federal taxable wages.
Similarly, certain fringe benefits, such as group-term life insurance or moving expense reimbursements, may be treated differently state by state. In this case, the amount in Box 16 may not be same as Box 1 and different employees may have different amounts in Box 16 and 17.
Use e-filing for certain states
Different states may require you to file W-2 electronically depending on the number of W-2s you file. While some states like New York mandates e-filing for more than 10 W-2s, others such as Michigan require all employers to file W-2 regardless of the employee headcount.
Employers reporting W-2 for states like Connecticut, Virginia and Wisconsin must file it electronically if they have more than 50 returns.
Contrarily, states like Arizona, Missouri and Colorado do not mandate e-filing.
State deadlines are not always the same as the IRS
While the deadline for filing W-2 with IRS is January 31, it might not be same for a few states. These states may require you to file it earlier or later than this date.
For example, Iowa requires W-2 to be filed by February 15, 2026. In states like New Hampshire and South Dakota, the deadline is February 28, 2026.
Multi-state employers must follow each state’s rules separately
What if your business operates in more than one state or if you hire workers from different state lines? You need to comply with the multi-state employment laws.
Multi-state employment law has various state tax laws that employers should comply with. For example, if you have employees working remotely in New York and New Jersey, you must register for payroll in both states, withhold according to each state’s rules, and file separate W-2s.
If an employee has worked in more than one state in a year, you cannot lump all these wages together in Box 16. Instead, split the wages and report the taxes based on the states where they have worked.
Report each state differently from Boxes 15-17. So, if an employee has worked from January to June in New York and July to December in New Jersey, you would fill the lines as below:
However, employees need not always pay the taxes in multiple states. Some states have reciprocity agreements that exempt employees from double taxation. This agreement allows employees to pay tax in their home state rather than paying it in the state they work as well.
For example, New Jersey and Pennsylvania have a reciprocal agreement. So, a New Jersey resident who is employed in Pennsylvania is not subject to Pennsylvania income tax and vice versa.
Keep in mind that not all states have reciprocity pacts with the other states.
Employers need to fill each box carefully to avoid any discrepancies in the W-2 filing. These discrepancies can lead to hefty penalties.
Here are most common errors to avoid while filing W-2:
No. States without income tax (like TX, FL, WA) don’t need tax but they require W-2 wage reporting for employment records or unemployment insurance. You should always read the employment laws before filing.
Some states define “taxable wages” differently. For example, 401(k) contributions are excluded federally but taxed in Pennsylvania. This is why Box 16 may not match Box 1.
Yes. If an employee worked in multiple states, you must list each separately in Boxes 15–17. Split wages and tax withheld according to where work was performed.
Employer ID is the unique payroll tax identification number assigned by your state. This number ensures state tax agencies correctly match your W-2 filings with your employer account.
Yes. If local withholding was done (e.g., in Philadelphia or Ohio cities), you must complete Boxes 18–20 with wages, tax withheld, and the locality name or code.
Most states follow the federal deadline of January 31. However, some require additional reconciliation forms or earlier filing. You should confirm your state’s annual filing calendar.
State and local tax reporting are equally important as federal tax. So, make sure to report each of these taxes correctly and validate each information before filing.
Even the slightest of errors can lead to penalties and notices. Use tax assistant like Tax1099 to e-file W-2s with the correct IDs, wage amounts, and tax data.