United States, April 15 deadline, every year: Every spring, tax season is in full swing and the W-2 form filing deadline is approaching. Employees, businesses and government agencies are faced with a multitude of tasks and obligations during this period that require accurate and timely fulfillment.
This phase of the US tax year requires precise preparation and submission of tax documents to the IRS (Internal Revenue Service). Form W-2 plays a particularly important role here, and its processing and evaluation presents numerous tax experts such as tax consultants, auditors, accountants and tax attorneys - as well as government agencies - with extensive challenges.
You don't know what the W-2 form is and what the purpose of this document is? Here you will find the answers you are looking for.
This article was written in German, automatically translated into other languages and editorially reviewed. We welcome feedback at the end of the article.
The challenge of dealing with W-2 forms
Many forms are difficult to fill out, and the W-2 is no exception. But simply filling out the form is not enough, as this is just one of many processing steps in the entire process. Wage and Tax Statement process. In addition to difficulties such as complexity and lack of knowledge, which employees in particular struggle with, employers also face challenges in connection with the W-2 form itself and the further handling of it:
Compliance with deadlines
Filing W-2 forms requires timely compliance with deadlines to avoid penalties and sanctions.
Example: US corporations as employers must ensure that W-2 forms are either mailed to employees or made available electronically by the end of January at the latest to avoid delays in filing.
Compliance with changing tax regulations
Tax regulations and laws change regularly, making it difficult to stay up to date. Tax professionals need to ensure that they understand and apply the latest regulations.
Example: The introduction of new laws such as the Tax Cuts and Jobs Act in 2017 brought significant changes to the United States tax laws and presented challenges for countless businesses and tax professionals as they had to adapt tax reporting, including W-2 forms, to the new laws accurately and expeditiously.
Security and data protection
The processing and transmission of W-2 information requires strict security measures to guarantee the protection of the personal data of all employees.
Example: A medium-sized company with around 500 employees is the victim of a Cyberattack. Cybercriminals launch a phishing attack in which the HR department receives a fake email claiming to be from the IRS. This email urgently requests the submission of all W-2 forms. The responsible employee falls for the deception and unknowingly discloses the sensitive W-2 information.
Volume and scalability
Large companies with thousands of employees face the challenge of filing a large number of W-2 forms. This requires Efficient processes and technologies as well as perfect time coordination, accuracy and consistency to manage the workload.
Example: A large retail company that operates nationwide employs thousands of employees in various stores and distribution centers, resulting in a significant amount of W-2 forms. All of these W-2 documents must be submitted to the IRS by the required deadline. Failure to do so could result in penalties and tax audits of the company.
Communication with employees
Companies must ensure that - in addition to properly distributing W-2 forms to employees - they are also able to answer any queries they may have.
Example: A potential challenge is when employees are unclear about the meaning of certain fields on the W-2 or when there are discrepancies between the information provided and the employees' individual records. This results in time-consuming corrections and subsequent submissions, which can lead to deadlines being missed.
Manual extraction of data
The manual extraction of data from the W-2 form is a tedious and error-prone task in further use, but it is an ideal basis for the Process optimization offers.
Example: The HR department of a company has the task of using relevant data from the W-2 for payroll accounting, tax filing and the calculation of social security contributions. As the inventory software in the existing IT structure is overwhelmed by increasing order volumes and is not scalable, this task has to be performed manually.
Use cases describe the necessity of extracting data from the W-2 form
But the above example is not the only one that illustrates why companies and authorities need to extract data from the W-2 form. Some other common use cases are:
Tax filing
Businesses must use the information contained on the W-2 form to file income tax returns for their employees with the IRS. This includes determining the income taxes owed by employees and withholding and remitting the appropriate amounts.
Payroll accounting
US companies use the data from the W-2 form to prepare payroll for their employees. This includes the calculation of gross income, deductions and taxes as well as the preparation of pay slips and wage statements.
Social security and Medicare contributions
The information from the W-2 form is used to calculate and monitor social security and Medicare contributions for employees. These amounts are paid to the relevant authorities.
Pension and retirement plans
Data from the W-2 form is required to calculate contributions to pension and retirement plans. This applies to both employer contributions and employee contributions.
Unemployment insurance
Unemployment insurance contributions are based on the data in the W-2 form. Companies use this information to pay the correct contributions to the unemployment insurance funds.
Tax audits
Both companies and authorities can use the information from the W-2 form for tax checks or audits. The accuracy of the reported income and deduction data is checked and, at best, confirms the correctness of the submitted tax returns.
Compliance with tax regulations
Companies must comply with the applicable tax regulations and laws. This requires the legally compliant recording and storage of W-2 forms in order to avoid possible legal consequences.
Employee counseling
Government agencies and other organizations use W-2 data to provide advice and assistance to employees when they have questions about tax filing or other financial matters.
The extraction of data from the W-2 form is therefore always relevant when the correct evaluation of income and taxes is paramount and compliance with applicable laws and regulations must be ensured.
The AI solution on the Konfuzio marketplace
To meet the above challenges, we provide you with the Marketplace from Konfuzio before. The marketplace is a central hub for trained AI models and tools. On this platform, Konfuzio brings together expert knowledge, AI software, Optical Character Recognition (OCR) and many other relevant technologies into play and brings together what belongs together:
Technical innovations combined with practical use cases.
Konfuzio is a leading company in the field of intelligent document processing and has specialized in the Data extraction from documents of all kinds. Experts have developed an AI model that fully automates the extremely precise extraction of data - especially from the W-2 form - and learns independently with every document processed.
-> Register now for free and test
Advantages of processing W-2 forms with AI
The automation of tax-related work steps brings many advantages. Among them:
Efficiency, accuracy and consistency
- Time savingAutomatic data extraction significantly reduces the time required for manual data entry, both for employees and employers. This is especially important during tax season when large volumes of W-2 forms need to be processed.
- Reduced errorsAI models extract data with high accuracy and minimize the risk of human error during data entry.
- UniformityAutomation enables consistent formatting of information so that it complies with IRS regulations. This reduces the likelihood of discrepancies in the tax reports.
User friendliness
- User-friendlyAutomatic data extraction with Konfuzio's AI model integrates seamlessly, making it the ideal add-on for existing software and IT systems. With the efficiently extracted and W2-relevant data, importing into third-party applications is no longer an obstacle, as this feature ultimately enables access for a wide range of users, including those with limited tax background knowledge.
- AccessibilityEmployees also receive electronic access to their extracted W-2 data, which makes it easier for them to complete their tax returns using tax software or in collaboration with tax experts.
Data analysis and recording management
- Insights into data: Automated extraction enables quick and easy extraction of the Data analysis. Employers and employees gain uncomplicated insights into their income and tax data, which may be valuable for financial planning and decision-making.
- Digital recordings: The process optimization improves the creation of digital records, which reduces the Storage and facilitates the retrieval of past W-2 forms for future reference or review.
Scalability, compliance and improved service
- Large amounts of dataEmployers who issue the W-2 form to a large number of employees benefit from scalable AI because it processes large data sets efficiently and accurately and keeps pace with fluctuating order volumes.
- Improved complianceKonfuzio's AI solution ensures that data is transcribed correctly, reducing the risk of compliance issues and potential IRS audits.
- Optimized workflowAI-powered data extraction gives tax professionals the advantage of providing faster and more accurate services to their clients while optimizing their own workflow during the tax season.
Environmental friendliness
- Reduced paperwork: Automated data readout reduces the need to print and handle paper forms, which also benefits the environment.
In summary, the benefits of automated data extraction with AI from a W-2 form are manifold and suitable for many different stakeholders.
Data protection and security at Konfuzio
Konfuzio takes data protection and data security very seriously. The AI model processes data exclusively in accordance with the GDPR and protects sensitive information throughout the entire extraction process.
-> Read more about data security at Konfuzio
W-2 Edit forms correctly on the marketplace
Using the Konfuzio AI model is simple. First register free of charge at app.confuzio.com. Request access to the listing "W-2 Wage and Tax form". After a successful access request, you as the user upload your W-2 forms to the platform and the trained AI model automatically extracts important data points, so-called labels, such as:
| LABEL | DESCRIPTION | TYPE | VALUE |
|---|---|---|---|
| Employee's name and address | Name and address of the employee. | Text | Aaron Jennings 33553 Lance Flat Apt. 278 East Madisonville MO 19417-7845 |
| Employee's social security | Social security number of an employee. | Text | 827-09-4164 |
| Employer's identification number | Employer's ID | Text | 24-5350727 |
| Employer's name and address | Employer's name and address. | Text | Wilson, Caldwell and Landry Ltd 71697 Ford Squares Apt. 503 Kimberlyville MN 58331-1198 |
| Local income tax | Local income tax. | Number | 45449.8 |
| Locality name | Name of a locality in a state. | Text | Mark Squares |
| Local wages tips etc | Locally applied wages, tips etc. | Number | 286887.99 |
| State | Two-letter state code. | Text | NY |
| State ID number | State ID number of an employer or an employee. | Text | 159-67-005 |
| State income tax | Income tax in a given state. | Number | 12004.72 |
| State wages tips etc | Wages, tips etc. in a given state. | Number | 113823.64 |
The extracted data is then available in a structured format that can be quickly and easily integrated into various tax software or financial systems.
The future of tax preparation with a practical example
Konfuzio's data extraction model for W2 forms is an innovative way for individuals, businesses and public authorities to efficiently approach tax preparation and administration.
The AI-powered model for W-2 tax forms offers a glimpse into the future of tax preparation, where automation and technology simplify the once tedious process.
Conclusion
Every year, the tax season in the United States brings with it a multitude of tasks and obligations for employees, companies and authorities. A central role is played by the W-2 form, which must be accurately prepared and submitted to the IRS. Employers, tax professionals and government agencies face a number of challenges, especially during this phase, ranging from meeting deadlines and changing tax regulations to security and privacy issues to managing large amounts of data and employee communications.
In order to meet these challenges and optimize the handling of the W-2 form, Konfuzio offers the following on its Marketplace offers an innovative solution. The trained AI model for automated data extraction from the W-2 form simplifies work steps, increases efficiency, improves accuracy and ensures compliance with regulations and deadlines. The benefits range from time savings, ease of use and data analysis to scalability and environmental friendliness.
Konfuzio has developed a pioneering solution for the automation of tax processes to significantly simplify tax preparation and administration. The extracted data is available in a structured format and can be seamlessly integrated into various tax software and financial systems.
In this way, Konfuzio shows how modern technologies and artificial intelligence (AI) can make the control process efficient.
It is up to you to decide whether you want to supplement your existing software with Konfuzio as a smart add-on or switch completely to the AI software want to switch.
Do you have any questions? Write a message to our experts.
