Understanding Form W-2, the Wage and Tax Statement

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

Illustration of what to do with your w-2
The Balance 

Form W-2 is a crucial document at tax time. For full-time employees, it’s the "wage and tax statement" that discloses your taxable income for the year. W-2s are generally provided for full-time employees of a company. A W-2 or 1099 MISC can be used for contractors depending on the employment agreement arrangement.

W-2 Obligations for Employers

Form W-2 is used by corporations and small businesses to report taxable income to workers. If a company reports with a W-2, taxes will be withheld for federal and state obligations. The W-2 also includes social security and government health care withholdings.

Employers must prepare a W-2 for each eligible employee and provide copies to the Internal Revenue Service and the Social Security Administration. As an employer, you must mail or hand-deliver Form W-2s to your employees no later than January 31 for the previous tax year.

Obligations for Employees: What to Do With the Form

As an employee, you're required to report all wages you earned from your job or jobs during the year on your tax return. Generally, the minimum for receiving any type of income tax reporting document is $600 in wages paid.

You should receive three copies of your W-2: Copy B, C and 2. Attach Copy B to your federal income tax return if you're mailing it in. Just keep it with your other tax documents for at least four years if you're e-filing your return. Keep Copy C with your tax documents for at least four years as well. This is officially your copy.

Attach Copy 2 to your state tax return if you're mailing it in. Otherwise, just keep it with your tax documents for at least four years as you would with Copy B.

Understanding Your W-2: All Those Lettered Boxes

Form W-2 actually comes in a variety of sizes, shapes, and formats. The exact format you'll see when you look at yours will depend on the way 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 full legal names. Box D is a control number that identifies your unique Form W-2 document in your employer's records.

If your name has changed, ask your company to update its records. If you've recently moved and your address has changed, this shouldn't be a complication as long as your tax return bears your current, correct address.

All Those Numbered Boxes: What Do They 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. Taxable fringe benefits such as group term life insurance will be 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. 

The amount from Box 1 is reported on Line 7 of your Form 1040 or 1040-SR.

If you have more than one employer providing you with a W-2 for the tax year, you will need to combine the totals into one. If you have several W-2 forms, add up the Box 1 amounts and enter the total. The same goes for other boxes below.

Box 2 reports the total amount your employer withheld from your paychecks for federal income taxes. This number is reported on Line 16 of Form 1040 and 1040S-R. Keep in mind that withholdings in this box will be determined by the information you provide in your federal W-4.

Box 3 reports the total amount of your wages subject to Social Security Administration tax. The Social Security tax is assessed on wages up to $132,900 as of 2019. If Box 3 shows an amount over the wage base, check with your employer.

Tips reported to your employer are not included in the Box 3 amount. They're reported in Box 7.

Box 4 reports the total amount of Social Security taxes withheld from your paychecks. The Social Security tax is a flat tax rate of 6.2 percent on your wage income up to $132,900 as of 2019, so the figure shown in Box 4 should be no more than $8,239.80.

If you had two or more jobs during the year and your total Social Security wages exceed $132,900, you might have paid in more Social Security tax than was required. You can claim the excess Social Security tax withholding as a refundable credit on your Form 1040.

Box 5 reports the amount of your wages subject to the Medicare tax. There is no maximum wage base for Medicare.

Box 6 reports the amount of taxes that were withheld from your paycheck for the Medicare tax, which is a flat tax rate of 1.45 percent of your total Medicare wages as of 2019.

You might find that the amount in Box 6 is greater than the amount in Box 5 multiplied by 1.45 percent if you earn a significant income. That's because the additional Medicare tax, which was implemented in 2013, adds an additional 0.9 percent on incomes over $200,000 if you're single or eligible to file as head of household. This drops to $125,000 if you're married but filing a separate return, and it increases to $250,000 if you're married and filing jointly.

If you're subject to this additional Medicare tax, your Medicare tax withholding that shows in Box 6 is reconciled on IRS Form 8959.

Box 7 shows any tip income you reported to your employer. It will be empty if you didn't report any tips. The amounts in Boxes 7 and 3 should add up to the amount that appears in Box 1 if you don't have any pre-tax benefits, or it might equal the amount in Box 5 if you do receive pre-tax benefits.

The total of Boxes 7 and Box 3 should not exceed the $128,400 Social Security wage base. The amount from Box 7 is already included in the Box 1 amount.

Box 8 reports any tip income that was allocated to you by your employer. This amount is not included in the wages reported in Boxes 1, 3, 5, or 7. Instead, you must add it to your taxable wages on line 7 of your Form 1040, and you must calculate your Social Security and Medicare taxes including this tip income using IRS Form 4137.

You might want to consult with a tax professional if any income shows in Box 8 of your W-2.

Box 9 was once used to report any advance of the earned income credit, but this tax perk ended in 2011 after the 2010 Education, Jobs and Medicaid Assistance Act, so Box 9 should 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. Amounts under $5,000 aren't taxable, but any amount over $5,000 should be reported as taxable wages in Boxes 1, 3, and 5. Dependent care benefits are reported on Form 2441.

Box 11 reports any amounts that were distributed to you from your employer's non-qualified deferred compensation plan or 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.

Three check boxes appear in Box 13. They'll 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 Form 1040 Schedule C. Your wages are not subject to income tax withholding so you should see a zero or blank amount in Box 2. They are subject to Social Security and Medicare tax, however, so Boxes 3 through 6 should be filled out.

They'll 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. Your ability to deduct contributions to a traditional IRA might be limited based on your income if you participated in a retirement plan, so check with a tax professional if this box is checked.

Finally, they'll 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's usually subject to Social Security and Medicare taxes.

Your employer may report additional tax information in Box 14. If any amounts are reported in Box 14, they 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 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 amount of 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. This amount might also be deductible as part of the deduction for state and local income taxes on Schedule A if you itemize your deductions. This box will be the result of the information you provided your employer in a state W-4.

Box 18 reports the total amount of wages subject to local, city, or other state income taxes.

Box 19 reports the total amount of 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. The description might identify a particular city or it may identify a state tax such as state disability insurance (SDI) payments.

What If There's a Problem With Your W-2?

If you haven't received your Form W-2 by mid-February, ask your employer when they were mailed out. You can also ask for another printed copy of your W-2, but employers will sometimes charge a nominal fee for providing you with an additional copy. If you think it's possible that your employer did not send out W-2s, you might want to contact the IRS for assistance.

You can also ask your employer to correct any wrong information on your Form W-2. Your Social Security number might be incorrect, your name might be spelled wrong, or your wages and withholding amounts might be inaccurate.

To avoid problems, verify that your information is correct near the end of the tax year before the company begins to focus on tax reporting.

What If Your Employer Refuses to Give You Form W-2? 

This is a serious situation. If the company is still in existence, politely demand a copy. If your employer still refuses to give you your W-2, contact the IRS at 1-800-829-1040.

Make sure you have certain information at your fingertips when you call: your employer's name and complete address, its tax identification number (if you know it), and its telephone number. You should also be able to provide at least an estimate of the wages you earned, the federal income tax that was withheld, and the dates that you began and ended employment if you're no longer working there. You can find this information on your paystubs. You may be provided with Form 4852.

Article Sources

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