W-2 Employee Income Documents

W-2 employee income documents play a crucial role in verifying and documenting the income of borrowers who are employed by a company or organization. A W-2 form, also known as the Wage and Tax Statement, is provided by the employer to each employee and reports the employee's annual wages and tax withholdings. Here are some important details about W-2 employee income documents:

• Contents of a W-2 Form: A standard W-2 form consists of several sections, including:

  • Employee Information: This section includes the employee's name, address, and Social Security number, as well as the employer's identification information.

  • Wage and Salary Information: This section displays the employee's total wages, tips, and other compensation received during the tax year. It outlines the breakdown of different types of income, such as regular wages, bonuses, commissions, and any taxable fringe benefits.

  • Tax Withholdings: The W-2 form provides information on federal, state, and local income tax withholdings from the employee's wages throughout the year. It also includes details of other deductions, such as Social Security and Medicare taxes.

  • Additional Information: The W-2 form may include other relevant information, such as retirement plan contributions, employer-sponsored healthcare coverage, and other benefits provided to the employee.

• Income Verification: Lenders use W-2 forms to verify and validate the borrower's income for previous years.

• Income Calculation: Lenders typically consider the income reported on the W-2 form as the basis for calculating the borrower's qualifying income. They may review the W-2 forms from the past two years to assess the borrower's income history and stability. However, if there are significant changes in income or employment, lenders may require additional documentation or explanations.

• Additional Documentation: In some cases, lenders may request additional documents in conjunction with W-2 forms to provide a more comprehensive view of the borrower's income. This can include pay stubs, employment verification letters, or other supporting documents to verify employment status and income consistency.

• W-2 & Self-Employment Income: It's important to note that if a borrower has both W-2 income and self-employment income, lenders will generally treat these income sources separately. The W-2 income will be assessed based on the corresponding W-2 forms, while self-employment income will be evaluated using additional documentation, such as tax returns and profit and loss statements.