Tax season can be a headache, but it doesn't have to be. One effective way to make filing your taxes easier is by better understanding one of the necessary tax forms: Form W-2.
You should receive your W-2 by mid-February at the latest. Employers must send out W-2s to their workers by January 31st each year (or a few days later if the end of the month falls on a weekend). If you haven't received it by then, then contact your employer. You cannot file your taxes until you've received your W-2, which is essential to the process.
Form W-2 helps the IRS determine how much income employees should be claiming and confirms what they have already paid in taxes and need to pay in taxes (if any). Form W-2 is a necessary component for tax returns and tax filing.
What is Form W-2?
Form W-2, or the Wage and Tax Statement, is the annual statement provided by your employer that reports your taxable income to you and the IRS. The form shows you and your employer's payments for Medicare and Social Security and taxes withheld from your pay.
All of the taxes withheld from your pay are on Form W-2. Information on Form W-2 goes to state and federal taxing authorities. It helps determine how much you should be paying in taxes for the given year.
Reading Form W-2
Reading a W-2 can be daunting if you do not understand the listed information. Form W-2 has multiple boxes explaining different aspects of your earnings and withholdings. Even if you're not trying to file your taxes, you should still be able to read your W-2.
Below is a short explanation of every box on Copy B of the W-2, which is the one you will file with your tax return:
Boxes A - F: Lists the following:
- Your Social Security number.
- Employer identification number (EIN).
- Your employer's name, address, ZIP code.
- Your name, address, and ZIP code.
Box 1: The total taxable income and other taxable compensation paid to you by the employer in the last tax year.
Box 2: The amount of federal income tax withheld from your pay.
Box 3: The total amount that is subject to Social Security tax .
Box 4: The Social Security tax withheld on income reported to your employer. This tax has a 6.2% rate, with a 2022 wage base limit of $147,000. In other words, the total contribution limit is $9,114 ($147,000 x 0.062).
Box 5: The total pay (including tips) is subject to Medicare tax.
Box 6: The amount of Medicare tax withheld. Each employee and employer pay 1.45% of the total 2.9% tax rate. In addition, anyone earning $200,000 a year or higher will pay an additional 0.9%, which is the employee's responsibility.
Box 7: Tips reported to your employer.
Box 8: Employer reports tips allocated to you.
Box 9: Outdated tax-defunct perk, so left empty.
Box 10: The amount of money provided for dependent care.
Box 11: Details the deferred compensation you received from your employer in a non-qualified plan.
Box 12: All of the codes your employer needs to report to the IRS:
- Reimbursements for moving expenses members of the armed forces.
- Non-taxable sick pay.
- Employer-provided adoption benefits.
Box 13: These options are not subject to federal income tax withholding. The checkboxes include:
- Statutory employee.
- Retirement plan.
- Third-party sick pay.
Box 14: A miscellaneous field. This field could include:
- Non-taxable income.
- Uniform payments.
- Union dues.
- Health insurance premiums.
Boxes 15 to 20: These boxes contain local and state income tax information from your employer. The boxes include:
- Employer's state ID number.
- State wages, tips, or commission.
- State income tax.
- Local wages, tips, or commission.
- Local income tax.
- Locality name.
You will also need to attach Copy 1 to any other tax returns you're required to submit (including state, city, or local).
Filing Form W-2
You should receive Form W-2 no later than January 31st of each year. However, if you do not receive it by mid-February, you should reach out to your employer. Once you receive Form W-2, you will be able to file for your tax return using Form 1040, your W-2, and any other financial and tax documents.