Understanding Your W-2
Knowing how to read your Form W-2, or Wage and Tax Statement, can help you understand your total overall compensation, and also help you get a head start when preparing your taxes. Not all the information recorded in the boxes of your W-2 is necessary when filing your taxes. Often, the amounts recorded are never transferred to your tax return. They are just there to show you the different income base for different taxes or to record other information, such as union dues.
While there are a variety of different forms your W-2 can take, they all contain the same information. Here's a line-by-line guide to reading your Form W-2.
Employer and Employee Identification (Boxes lettered A-F)
· Box A: This is your Social Security number.
· Box B: This is your employer's unique tax identification number.
· Box C: This identifies the name and mailing address of your employer. The address may show your company's headquarters rather than its local address if your company has multiple locations.
· Box D: The control number is a code that identifies this unique Form W-2 in your employer's records. This number is assigned by the company's payroll processing software.
· Box E: This identifies your full name (first name, middle initial, and last name).
· Box F: This identifies your mailing address.
If any of the above information is incorrect or outdated, inform your employer’s human resources or payroll department so they can correct it and issue you a new Form W-2 if necessary.
Numbered Boxes on Form W-2
· Box 1: Wages, tips, and other compensation. This is the total of your taxable wages, tips, and other compensation and taxable fringe benefits. This can include back pay, bonuses, commissions, severance or dismissal pay, and vacation pay.
· Box 2: Federal income tax withheld. Box 2 reports the total amount withheld from your paycheck for federal income taxes. This represents the amount of federal taxes you have paid throughout the year.
· Box 3: Social Security wages. Box 3 reports the total amount of wages subject to the Social Security tax. Wages are taxed up to a certain limit, called the Social Security wage base. Wages above the Social Security wage base are not subject to the Social Security tax.
· Box 4: Social Security tax withheld. Box 4 reports the total amount of Social Security taxes withheld from your paycheck. Normally, the Social Security tax is 6.2% of your wage income.
· Box 5: Medicare wages and tips. This is the total of your wages and tips that are subject to the Medicare tax. There is no limit on Medicare tax.
· Box 6: Medicare tax withheld. Box 6 reports the amount of taxes withheld from your paycheck for the Medicare tax. The Medicare tax has a flat tax rate of 1.45% of your total Medicare wages. Higher-income employees may be subject to withholding for the Additional Medicare Tax at a rate of 0.9%.
· Box 7: Social Security tips. Box 7 reports the amount of tip income that you reported to your employer. If you did not report tips to your employer, you will not have an amount in this box. This amount is already included in Box 1.
· Box 8: Allocated tips. Box 8 reports any tip income allocated to you by your employer.
· Box 9: No longer used. Generally no longer used, but some users may see a verification box. Visit www.irs.gov for more information.
· Box 10: Dependent care benefits. Box 10 shows the total amount of dependent care benefits that your employer paid to you or incurred on your behalf. This would include employer-provided daycare costs or employer-reimbursed daycare costs. Amounts under $5,000 are non-taxable benefits. Any amount over $5,000 is reported as taxable wages in Boxes 1, 3, and 5.
· Box 11: Nonqualified plans. This amount can be one of two things. It can be a distribution made to you from a nonqualified deferred compensation plan or a nongovernmental section 457 plan. In this case, the taxable amount is included in Box 1.
· Box 11 can also be a prior year deferral under a non-qualified or section 457 plan that became taxable for Social Security and Medicare taxes this year because there is no longer a substantial risk of forfeiture of your right to the deferred amount. These amounts are also included in Box 3 and/or Box 5.
- Box 12: Deferred compensation and other compensation. There are several types of compensation and benefits that may be reported in Box 12. Box 12 will report a single-letter or double-letter code followed by a dollar amount. Some of these codes have already been reported in other areas of the W-2 as part of other amounts, but are isolated here for tax reporting purposes. Others have not been reported elsewhere on your W-2.
Here are the codes for Box 12:
o Code A. Uncollected Social Security or railroad retirement (RRTA) tax on tips.
o Code B. Uncollected Medicare tax on tips.
o Code C. Taxable benefit of group term life insurance over $50,000. This amount is included as part of your taxable wages in Boxes 1, 3 and 5.
o Code D. Non-taxable elective salary deferrals to a 401(k) or SIMPLE 401(k) retirement plan.
o Code E. Non-taxable elective salary deferrals to a 403(b) retirement plan.
o Code F. Non-taxable elective salary deferrals to a 408(k)(6) SEP retirement plan.
o Code G. Non-taxable elective salary deferrals and non-elective employer contributions to a 457(b) retirement plan.
o Code H. Non-taxable elective salary deferrals to a 501(c)(18)(D) tax-exempt plan. This amount is included in Box 1 wages.
o Code J. Non-taxable sick pay. This amount is not included in taxable wages in Boxes 1, 3 or 5.
o Code K. Excise tax (equal to 20%) on excess "golden parachute" payments.
o Code L. Non-taxable reimbursements for employee business expenses.
o Code M. Uncollected Social Security or RRTA tax on taxable group term life insurance over $50,000 for former employees.
o Code N. Uncollected Medicare tax on taxable group term life insurance over $50,000 for former employees.
o Code P. Non-taxable reimbursements for employee moving expenses, if the amounts were paid directly to the employee.
o Code Q. Non-taxable combat pay.
o Code R. Employer contributions to an Archer medical savings account.
o Code S. Non-taxable salary deferral to a 408(p) SIMPLE retirement plan.
o Code T. Employer-paid adoption benefits.
o Code V. Income from the exercise of non-statutory stock options. This amount is already included as taxable income in Boxes 1, 3 and 5.
o Code W. Employer and employee contributions to a health savings account.
o Code Y. Salary deferrals under 409A non-qualified deferred compensation plan.
o Code Z. Income received under 409A non-qualified deferred compensation plan. This amount is already included in taxable wages in Box 1.
o Code AA. After-tax contributions to a Roth 401(k) retirement plan. This amount is already included in taxable wages in Box 1.
o Code BB. After-tax contributions to a Roth 403(b) retirement plan. This amount is already included in taxable wages in Box 1.
o Code DD. The cost of non-taxable health insurance is provided through your employer.
o Code EE. After-tax contributions to a Roth 457(b) retirement plan offered by government employers. This amount is already included in taxable wages in Box 1.
Additional Numbered Boxes
· Box 13: Check the box. There are three checkboxes in Box 13. Boxes will be checked off if any of these situations apply to you as an employee.
o Statutory employees are employees whose earnings are subject to Social Security and Medicare tax, but not income tax. Full-time life insurance salespeople (traveling or not), agents, commission drivers, and home-workers can file as self-employed instead of filing as employees.
o “Retirement plan” means that you participated in your employer's retirement plan during the year. This might be a 401(k) plan, 403(b) plan, SEP-IRA, SIMPLE-IRA or other type of pension plan.
o “Third-party sick pay” means that you received 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).
· Box 14: Other tax information. Your employer may report additional tax information in Box 14. If any amounts are reported, they will have a brief description of what the amounts are for. Items that may be reported here include union dues, employer-paid tuition assistance and after-tax contributions to a retirement plan. Some employers report certain state and local taxes in Box 14, such as State Disability Insurance (SDI) premiums.
· Box 15: State and state employer's identification. Box 15 reports your employer's state and state tax identification number. If you worked for the same employer in multiple states, there may be multiple lines of information.
· Box 16: State wages. Box 16 reports the total amount of taxable wages earned in that state. If you worked for the same employer in multiple states, there may be multiple lines of information.
· Box 17: State income tax withheld. Box 17 reports the total amount of state income taxes withheld from your paychecks for the wages reported in Box 16.
· Box 18: Local wages. Box 18 reports the total amount of wages subject to local, city or other state income taxes.
· Box 19: Local income tax withheld. Box 19 reports the total amount of taxes withheld from your paychecks for local, city or other state income taxes.
· Box 20: Locality name. Box 20 provides a brief description of the local, city or other state tax being paid. The description may identify a particular city or may identify a state tax such as SDI payments.
For additional clarification, or if you have any questions about how to report income and deductions, please consult your employer’s human resources or payroll department or a qualified tax professional
This Know Your Benefits article is provided by Benefits Blueprint and is to be used for informational purposes only and is not intended to replace the advice of an insurance professional. © 2014, 2020 Zywave, Inc. All rights reserved.
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