Regular employees of a business will receive Form W-2 from their employers every year.
W-2 Form Definition – The W-2 is a wage and tax statement that shows taxable income for the previous calendar year. Workers who are contractors may receive W-2s, but it is more likely that they will receive 1099-MISC (forms) from entities for which they have worked.
If you do receive a W-2, it’s important to learn how to read a W-2 and understand it so you can ensure that your pay data is correct for income tax season.
Employer Obligations
Businesses are obligated to report the taxable income of workers, including the amounts withheld for federal and state taxes. W-2 forms also show other withholdings, such as Social Security and any other local, state, or federal taxes.
When the new calendar year begins, employers must prepare a W-2 for every eligible employee as well as send a copy of this form to both the Internal Revenue Service and the Social Security Administration.
Forms must be prepared and delivered before the end of January for the previous tax year.
Employee Obligations
Employees must report all pay earned during the previous tax year when they file their tax returns.
Employees attach a copy of the W-2 to their federal income tax return when mailing a physical return to the IRS. Another copy of the W-2 goes to the state when mailing a tax return. Employees retain a copy for personal records, too, and should keep this document for at least four years.
Understanding the W-2
When reading a W-2, it may get confusing to understand how to read a W-2 earnings summary or how to read the W-2 gross income. It’s because the W-2 contains many boxes and codes that pertain to the wages and withholdings for the tax year. Below you’ll find the W-2 boxes explained including W-2 wages:
- Box 1: Wages, tips, prizes, and other compensation
- Box 2: Total federal income tax withheld from earnings
- Box 3: Wages subject to Social Security tax
- Box 4: Amount of Social Security tax withheld from earnings
- Box 5: Wages subject to Medicare tax
- Box 6: Amount of Medicare tax withheld from earnings
- Box 7: Any tip income reported to the employer
- Box 8: Tip income allocated to the employee by the employer
- Box 9: Verification code for e-filed returns (not yet included for all taxpayers)
- Box 10: Dependent care benefits provided (if applicable)
- Box 11: Total amount distributed to employee from employer’s non-qualified deferred compensation plan
- Box 12: May show W-2 codes reflecting various types of compensation or benefits
- A: Uncollected Social Security tax on tips
- B: Uncollected Medicare tax on tips
- C: Taxable cost for group-term life insurance if over $50,000
- D: Elective deferrals for a 401(k) or deferred arrangement
- E: Elective deferrals for a 403(b) plan
- F: Elective deferrals for a 408(k)(6) plan
- G: Elective deferrals or employer contributions to a deferred compensation plan
- H: Elective deferrals for a 501(c)(18)(D) plan
- J: Nontaxable sick pay
- K: Excise tax of 20% on “golden parachute” pay
- L: Reimbursements for substantiated business expenses
- M: Uncollected Social Security tax on costs of group-term life insurance if over $50,000
- N: Uncollected Medicare tax on costs of group-term life insurance if over $50,000
- P: Excludable moving expense reimbursements that were paid to an employee who is a member of the U.S. military
- Q: Nontaxable combat pay
- R: Employer contributions to an Archer medical savings account
- S: Employee salary reduction contributions for a 408(p) SIMPLE plan
- T: Adoption benefits
- V: Income derived from the exercise of non-statutory stock options
- W: Employer contributions to a health savings account
- Y: Deferrals under a 409(a) non-qualified deferred compensation plan
- Z: Income derived under a non-qualified deferred compensation plan that did not satisfy section 409(a)
- AA: Roth contributions under a 401(k) plan
- BB: Roth contributions under a 403(b) plan
- DD: Cost of an employer-sponsored health plan
- EE: Roth contributions under a 457(b) plan
- FF: Benefits under a qualified small employer reimbursement arrangement for heath care
- GG: Income from qualified equity grants pertaining to section 83(i)
- HH: Aggregate deferrals pertaining to section 83(i) elections
- Box 13: If the “retirement plan” box is selected, special limits may apply for the amount of traditional IRA contributions that can be deducted.
- Box 14: Employers may use this box to report:
- Withholding of state disability insurance taxes
- Union dues
- Uniform payments
- Health insurance premiums
- Nontaxable income
- Educational assistance payments
- Parsonage allowance and utilities for clergy
- Charitable contributions
Railroad employers may also report:
- RRTA compensation
- Tier I and II tax
- Medicare tax
- Box 15: The employer’s state and state tax identification number
- Box 16: The total amount of taxable wages on the W-2, earned in the state
- Box 17: Total amount of state income taxes withheld based on the amount in Box 16
- Box 18: Total amount of wages subject to local, city, and other income taxes
- Box 19: Total amount of taxes withheld for local, city, and other income taxes
- Box 20: Description of local, city, or other income tax being paid
W-2 Problems
Employees who haven’t received a W-2 by mid-February should inquire about the form with employers.
It may also be possible to ask for another printed copy of the W-2, but some employers might charge a small fee for this. Employees can also contact the IRS for help if an employer hasn’t sent out these statements.
If the information on a W-2 is incorrect, an employee can ask the employer to correct and reissue a W-2. It’s helpful to check your pay stub at the end of the calendar year to ensure that the reported earnings are correct for the ending tax year.
- General Instructions for Forms W-2 and W-3
- What You Need to Know About Your W-2
- How to File Your Federal Taxes
- W-2 and 1099 Explained
- Form W-2 Explained
- Description of Each Box on Form W-2
- Explanation of the W-2 Wage and Tax Statement
- Understand Your W2 Wages
- Understanding Your W-2
- W-2 Box Descriptions
- Intro to the W-2 (video)
- What Is a W-2 Form?
- Which Is Better: The Pros and Cons of 1099 vs. W-2
- W-2 and Taxes
- What Do I Do if I Didn’t Get My W-2 or the W-2 I Got Has Errors?
- What Exactly Is a W-2?
- Understanding Your Forms W-2 and 1042-S
- Sample Form W-2
- What The Heck Is a W-2? A Beginners’ Guide to Filing Taxes
