W-2 Form: What It Is and How to Read It at Tax Time

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Tax season can be a stressful time, especially if you’re a freelancer, contractor, or small business owner who doesn’t have a dedicated team to manage your financial record-keeping and accountability. Here’s a pro tip: get reading a W2 or 1099 down pat.

One of the important tax documents you need to understand is the W2 form. It’s a wage and tax form for the previous calendar year generated by an employer for eligible employees. And it must be delivered before January ends.

Nowadays, you can file returns online. But if you file on paper, you usually need up to four copies of the form because you’ll have to send a copy to the Social Security Administration and Internal Revenue Service.

Reading a W2: Boxes Explained

On the right side of the W2 form are boxes A to F where you need to fill in employee and employer information, such as social security number, employer identification number, your full name, job address, and current address. 

The left side of the W2 form has the numbered boxes, which produce a lot of questions. Here’s a rundown of these boxes: 

  • Box 1 shows how much of your total income was taxable for that fiscal year.
  • Boxes 2 to 6 show what income was withheld for taxes.
  • Boxes 7 to 10 are about special forms of income through your employer.
  • Boxes 11 to 12 are for deferred compensation plans or various benefits.
  • Box 13 is the retirement program box.
  • Box 14 includes additional information.
  • Boxes 15 to 20 go through a similar process as state income tax.

You should visit the IRS website to learn the specific instructions for reading a W2, which include how to fill in the form’s boxes and detailed instructions for the codes pertaining to wages and withholdings. 

In addition, as advised, reach out to your state or locality if there’s any specific information for reporting, like local taxes. This is particularly important for those who relocate. Also, ask your employer if there are things you’re not sure about like information for Boxes 11 and 12. 

Calculating Taxable Wages on your W2 Form

The information you need for your W2 wages is on your pay stub, which is a statement of your earnings and includes compensation, exemptions, and deductions. To calculate your taxable income, find your gross income or total earnings without deductions and tax withholdings. 

When you’ve already determined your gross income, deduct any non-taxable wage from it, such as gifts and disability wages. The number should match the amount in your W2 form’s Box 1. If it doesn’t, try asking your employer or payroll department about it.    

Pay Stub Generator

Tax season may not be the most wonderful time of the year. But you can avoid the unnecessary stress it brings when you get help, such as a one-stop solution for your pay stub needs here at Paystubs 365. Use our services: Paystub Generator.

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