Understanding W-2: Your Guide To The W-2 Tax Form
14, Nov, 2018
Understanding W-2: Your Guide To The W-2 Tax Form
Author - Phil Baker

Every year around January, employers across the country issue out W-2 tax forms to their employees. These employees use these forms to file their taxes, and thus begins a new tax season every year.
However, how many of those employees, or employers for that matter, really know what the W-2 form is? It may not be a thought that's crossed your mind too often, but, how much do you really know about the W-2?
Continue reading to enhance your understanding of W-2 tax forms.

What Is a W-2 Form?

The W-2 tax form is a statement of wages and taxes for the previous year. It is issued out by employers to employees so they can file their taxes. However, the W-2 is needed for more than filing taxes.
An employer must issue a W-2 to employees if the employer has paid over $600 to the employee, or if the employer withheld any withholdings from the employee such as social security or Medicare.
The employer must also prepare six copies of every W-2 issued to an employee. You probably know that you get three copies for yourself. But where do the other three go?
The first copy, Copy A, is sent to the Social Security Administration. The second copy, Copy 1, is sent to either a state, city or local tax department. And finally, the third copy, Copy D, is kept by the employer for their records.
Have you ever wondered why you get three copies? There is a purpose to it. Copy B of your W-2 is generally filed with your federal taxes, Copy 2 is filed with your state or local taxes when you file and Copy C is for your own personal records.
Now that you know what the W-2 is and why it is issued, let's take a look at what information is actually contained in the W-2 and what it all means.

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How to Read a W-2

The actual layout of the form may vary from employer to employer, however, all the information contained within the W-2 is the same no matter where you work. Each box will have the same labels and will contain the same information no matter who issued the form.

  • Box 1 contains your total taxable wages or salary to include tips you reported
  • Box 2 is the amount your employer withheld from your paychecks for federal income taxes
  • Box 3 is the amount of your wages that are subject to Social Security tax
  • Box 4 is the amount of Social Security taxes withheld from your paychecks
  • Box 5 contains the amount of your wages subject to the Medicare tax
  • Box 6 is the actual amount of Medicare tax withheld
  • Box 7 contains any tips you reported to your employer
  • Box 8 contains tip income allocated to you by your employer
  • Box 9 is no longer used and should be empty
  • Box 10 Amounts you may have been reimbursed for dependent care expenses
  • Box 11 amounts distributed to you from your employer's non-qualified deferred compensation plan
  • Box 12 contains deferred compensation and other compensation
  • Box 13 contains three boxes to check concerning statutory employment, the employer's offered retirement plan and sick pay
  • Box 14 contains any information that does not fit into another box on the form
  • Box 15 contains the employer's state and state tax ID number
  • Box 16 is the total amount of wages subject to state tax
  • Box 17 the total amount of wages withheld for state taxes
  • Box 18 contains the city or local taxes you may be subject to
  • Box 19 the amount of city or local taxes withheld
  • Box 20 the name of the state, city, or local entity withholding tax reported in Box 19

Be sure to review your W-2 for accuracy and completeness. If you fail to do so and your taxes are wrong because of your W-2, you could end up holding the bag.

What If There Are Errors on Your W-2?

If you do find any errors on your W-2 you should let your employer know right away so they can make the necessary corrections before your taxes are late. It's not uncommon, however, for there to be some errors.
Names get misspelled, the wrong key on the keyboard is pressed when entering wages, and sometimes the employer may be new at handling taxes and may have been withholding the wrong amounts. If there is an error, it is not the end of the world.
Your W-2 must be issued to you by January 31st, if by mid-February you have not received it yet, contact your employer and ask when was it sent out and through whom. This way you have an understanding of when you can expect it.
If however, your employer refuses to issue a W-2 and you know you are supposed to be getting one, then this is a more serious problem.
You can try explaining to the employer the consequences of not issuing you a W-2, but if they still refuse then you'll need to call the IRS. Be sure you have the name of the employer, their full address, their tax identification number, and their contact number. It would also be wise to have your last pay stub handy for any more questions they might have.
The IRS will contact the employer and give you guidance on any other tasks or steps to complete.

Understanding W-2 for Tax Season

So there you have it, the almighty W-2 tax form. Everyone gets a W-2 from their employer but few understand the information that is on it, what it is for, why they receive three copies, and what to do if there are errors or their employer refuses to give them one.
Rest easy now that you are no longer among those not in the know. In the information age that we find ourselves in, and with everything becoming electronic, it is easier for us to dig in, research and understand things better. 
We're here to help point you in the right direction and give you the tools to succeed. Try our form W-2 creator today!

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