Understanding Form W-2

Form W-2 is a crucial document at tax time. It’s the "Wage and Tax Statement" that reports your taxable income for the year. Taxes are withheld by your employer and paid in to federal and state taxing authorities if a company reports with a W-2. The form also includes Social Security and Medicare.

Form W-2 reports the wages you earned and the taxes you paid

What the Lettered Boxes Mean

Form W-2 actually comes in a variety of sizes, shapes, and formats. What you'll see when you look at yours depends on how your employer processes payroll, but every Form W-2 contains the same information regardless.

Boxes A through F are all identifying information: your Social Security number, your employer's tax ID number or EIN, everyone's addresses, and their full legal names. Box D is a control number that identifies your unique Form W-2 document in your employer's records.

What the Numbered Boxes Mean

The numbered boxes on Form W-2 record your financial information.

Box 1 reports your total taxable wages or salary. The number includes your wages, salary, tips you reported, bonuses, and other taxable compensation.4

Taxable fringe benefits such as group term life insurance are included here, but Box 1 does not include any pre-tax benefits such as savings contributions to a 401(k) plan, 403(b) plan, or health insurance.

Box 2 reports how much your employer withheld from your paychecks for federal income taxes.

Box 3 reports the total amount of your wages that are subject to Social Security tax. This tax is assessed on wages up to $132,900 as of tax year 2019. This "wage base" is adjusted annually to adapt for inflation.

Box 4 reports the total amount of Social Security taxes withheld from your paychecks. 

Box 5 reports the amount of your wages that are subject to the Medicare tax. There's no maximum wage base for Medicare.

Box 6 reports how much in taxes that were withheld from your paychecks for the Medicare tax.

Box 7 shows any tip income you've reported to your employer. It will be empty if you didn't report any tips.

Box 8 reports any tip income that was allocated to you by your employer. This amount is not included in the wages that are reported in Boxes 1, 3, 5, or 7.

Box 9 was once used to report any advance of the earned income credit, but this tax perk ended in 2011 after the Education, Jobs and Medicaid Assistance Act of 2010. Box 9 should therefore be empty.

Box 10 reports any amounts you might have been reimbursed for dependent care expenses through a flexible spending account, or the dollar value of dependent care services provided to you by your employer.

Box 11 reports any payments that were distributed to you from your employer's non-qualified deferred compensation plan or a non-government Section 457 pension plan. The amount in Box 11 is already included as taxable wages in Box 1.

Box 12 applies to deferred compensation and other compensation. Several types of compensation and benefits can be reported in Box 12, so the IRS has simplified this as much as possible by allowing your employer to enter a single letter or double letter code followed by the dollar amount of your compensation.

Box 13 has three check boxes. They first will be marked off if you're a statutory employee. This means that you would report the wages from this W-2—and any other W-2 forms you receive that are marked "statutory employee"—on Schedule C of Form 1040.15 

 

Your wages are not subject to income tax withholding so you should see a zero in Box 2, or it should be blank. Earnings are subject to Social Security and Medicare tax, however, so Boxes 3 through 6 should be filled out.

These boxes will also be checked if you participated in your employer's retirement plan during the tax year. This might be a 401(k) plan, a 403(b) plan, SEP-IRA, SIMPLE-IRA, or another type of pension plan. 

Finally, these boxes will be checked if you received third-party sick pay under your employer's third-party insurance policy instead of receiving sick pay directly from your employer as part of your regular paycheck. Sick pay is not included in your Box 1 wages, although it is usually subject to Social Security and Medicare taxes.

Box 14 may contain additional tax information your employer may choose to report. Any amounts reported in Box 14 should include a brief description of what they're for. Union dues, employer-paid tuition assistance, or after-tax contributions to a retirement plan can be reported here. Some employers may report certain state and local taxes in Box 14.

Box 15 reports your employer's state and state tax identification number.

Box 16 reports the total taxable wages you earned in that state. There might be multiple lines of information here, too, if you worked for the same employer in multiple states.

Box 17 reports the total amount of state income taxes withheld from your paychecks for the wages reported in Box 16.

Box 18 reports wages that are subject to local, city, or other state income taxes.

Box 19 reports the total taxes withheld from your paychecks for local, city, or other state income taxes. This amount might also be deductible as part of the deduction for state and local income taxes on Schedule A.

Box 20 provides a brief description of the local, city, or other state tax being paid.

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