Extracting Data From W-2 With Intelligent Document Processing
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
What Are W-2 Forms?
The Wage and Tax Statement, commonly known as W-2, is a document in the United States that employees receive from their employers to file their taxes. It reports the annual income that employees receive from their organization and the amount of tax they are liable to pay. An employer is required to issue W-2 tax statements to every employee at the end of each year, and once the employees fill out these forms, they are sent to the Internal Revenue Service (IRS).
What Can You Infer From W-2 Forms?
W-2 forms contain a wealth of information about an individual's income, employment status, certain financial aspects, etc. The form is divided into two sections — state and federal, as employees must file their taxes on both these levels. A W-2 contains a section about the employer, including the Employer Identification Number (EIN) and the state ID number. The other sections include details of the employee’s income from the previous year, information about their deductions, medical insurance, paycheck variations, social security number, dependent care benefits, etc.
The form records the employee’s total annual income and the tax liability for that amount. This payable tax is separated into federal income tax, social security tax, etc. If the employee receives tips, the total amount of money earned in tips for the year must also be recorded. Say the employee works multiple jobs a year, they must fill out each W-2 separately.
The data provided in W-2s allows financial organizations to understand the credibility of both the employer and the employee. It enables banks and other financial institutions to measure the financial health of the individual and assess their tax-paying behavior. This helps them in making decisions regarding money matters of the individual. It also serves as a legal document that establishes a citizen as a trustworthy taxpayer.
Who Uses Data From W-2 Forms?
W-2s are utilized by several authorized entities, each with specific purposes. Some common entities who use W-2 data are:
Employees & Employers
Financial Institutions and Lenders
State Tax Agents
Visa and Immigration Officials
Social Security Administrators (SSA)
Legal and Regulatory Bodies
Where Are W-2 Forms Used?
W-2s are used primarily within the U.S and are a fundamental part of their tax system. They serve as a crucial tool for reporting and managing income and tax obligations.
These tax statements are used by authorized individuals and organizations to accurately track income, ensure tax compliance, and make informed financial decisions. Some of the common areas that use W-2 forms are:
Internal Revenue Service (IRS)
State Tax Agencies
Tax Preparation Services
Social Security Administration (SSA)
Government Assistance Programs
Legal and Employment-related Matters
What Are The Challenges In Extracting Data From W-2 Forms?
Several challenges arise while extracting data from W-2s. These tax statements are complex, contain sensitive information, and come in different versions. Apart from these, there are high error rates that occur during data entry, complex calculations, and data validation. W-2s may come from mixed sources, contain missing information, or have to assess foreign taxes and international employees. Keeping these challenges in mind, manual review and verification by trained professionals are often necessary to ensure the accuracy of the extracted data before it is used for tax reporting or other purposes, which can be time-consuming.
What Is Intelligent Automation Of W-2 Extraction?
Intelligent automation of W-2 extraction refers to the use of advanced technologies, such as machine learning (ML) and artificial intelligence (AI), to streamline and enhance the process of extracting data from these tax statements. By using Infrrd IDP for W-2 data extraction, organizations can transform a complex and time-consuming process and make it seamless by improving accuracy, efficiency, and data integrity. It can also reduce manual intervention and minimize errors in the extraction process.
A Comparison Of The Benefits Of Manual Processing Of W-2 Forms Against Human-Steered Infrrd IDP
What Are The Benefits Of Automating W-2 Data Extraction?
There are several benefits to using Infrrd IDP to extract data from W-2 forms:
Accuracy: Machine-driven extraction reduces the likelihood of human errors.
Efficiency: Significantly faster than manual data entry, leading to time saving and increased productivity.
Scalability: Ability to process large volumes of W-2s quickly and consistently.
Data Integrity: Validations and checks to maintain the quality and accuracy of the extracted data.
Compliance: Adherence to data privacy and security regulations, ensuring sensitive information is handled appropriately.
Cost Savings: Reducing manual labor and minimizing errors, potentially saving costs associated with data entry and correction.
Adaptability: Ability to train the system to accommodate changes in W-2 form layouts or versions over time.
Ready to get started?
See our platform in action to experience the transformative efficiencies it can bring to your processes
In a fast-paced world filled with never-ending rivers of documents and data, organizations continuously need smarter ways to work. Teams need flexible solutions that enable them to work faster while delivering higher levels of reliable accuracy than ever before. At Infrrd, we empower teams with Intelligent Document Processing Solutions for Intelligent Work™.