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Understanding Your Form W-2

Tax season is upon us once again. Every year, employees start to receive their income tax Form W-2 from their employer(s) for the previous year. Many employees will have their tax return done by a hired service, but some will file their return on their own. In any case, how many employees actually understand what is on their W-2, or know how to locate the right information? We’re breaking down the sections of a W-2, so you can feel confident during tax season this year.

Understanding W-2 Boxes

At first glance, a W-2 looks like one giant chart with many boxes containing numerical data. The W-2 boxes and W-2 “codes” show the wages employees earned and any taxes paid through withholding.

Box 1: This box shows wages, tips, and other compensation for the year, or for the time of the year you were employed with the employer. This is the amount to include on the wages line of your return. If you have more than one W-2 for the year, the total should be included on Form 1040 (individual tax return form), line 1.

Box 2: This box shows the total federal income tax amount withheld from your paychecks for the tax year. This amount would be included on the federal income tax withheld line of your return (Form 1040, line 25a).

Box 3: This shows your wages subject to Social Security tax, and this amount may be different from what’s reported in Box 1.

Box 4: This box shows the total amount of Social Security tax withheld from your pay for the tax year.

Box 5: This shows your wages subject to Medicare tax. As with Social Security tax, the amount in Box 5 may not match what is recorded in Box 1.

Box 6: This box shows the total amount of Medicare tax withheld. This amount includes:

  • 45% Medicare tax withheld on all Medicare wages and tips recorded in Box 5.
  • 9% additional Medicare tax on any of those Medicare wages and tips exceeding $200,000.

Box 7: This box shows any tip income you reported to your employer.

Box 8: This box shows tip income allocated to you by your employer. This amount is not included in Boxes 1, 3, 5, or 7. For more information on reporting tip income, click here.

Box 9: This box is typically left blank but can contain a verification code if your employer is participating in an Internal Revenue Service (IRS) pilot program.

Box 10: This box shows the dependent care benefits provided under a dependent care assistance program. Any amount in Box 10 that exceeds $5,000 is included in Box 1. You can complete Form 2441—Child and Dependent Care Expenses—to compute any taxable and nontaxable amounts.

Box 11: This box shows the total amount distributed to you from your employer’s non-qualified (taxable) deferred compensation plan.

Box 12: This box will contain a code ranging from A-HH, and reflects different types of compensation or benefits.

Box 13: There are three checkboxes in Box 13 that report the following:

  • If the “retirement plan” box is checked, you were an active participant in a retirement plan, such as a 401(k), in the past tax year. Special limits can be applied to the amount of traditional IRA contributions you can deduct.
  • If the “statutory employee” box is checked, your earnings are subject to Social Security and Medicare taxes, but not federal income tax. If this is checked, Box 1 will need to be carried over to Schedule C, line 1.
  • If the “third-party sick pay” box is checked, you received sick pay under a third-party insurance provider.

Box 14: This box is for your employer to include anything that doesn’t fit in a different area on the form. For example, this could include nontaxable income, union dues, educational assistance payments, etc.

Boxes 15-20: These last boxes include any state and local income tax reported by your employer.

Navigating tax season can be stressful. At Harbor America, we’re here to help alleviate that stress. Through our payroll administration, we file and distribute your W-2s and can help handle your state and federal tax filings. We help you make sure your tax filings are done correctly, so you can worry about one less item on your to-do list. Contact us to learn more.


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