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What Do All the Boxes Mean on My W-2?

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When you look at your W-2 and ask yourself, “What do all the boxes mean?” You are not alone.

W-2 2020

To assist you we have found a reliable source to help you interpret your W-2. Kelly Phillips Erb from Forbes Magazine breaks it all down in an article titled, “How to Read Your Form W-2 At Tax Time.” Let’s dive in……

Employers are required to prepare six copies of the W-2. Traditionally employers distributed a paper version of the W-2, however over the past few years employers have elected to distribute W-2s electronically. In order for employers to distribute an electronic W-2 they need the employee’s consent. For more information about the benefits of electronic W-2s, for both the employer and the employee, see our blog The Pros of Electronic W-2s.

As an employee, you get three copies:

Copy B is used to report your federal income taxes and is generally filed with your federal income tax return.

Copy 2 is used to report your state, city, or local income tax.

Copy C is for your records. Keep this copy for at least three years after you file or the due date of your return, whichever is later.

The left side of the form is for reporting taxpayer information:W-2 Name and Address      

Box a. Your Social Security Number (SSN) is reported in box (a). You should always double-check this to make sure it is correct. If it is not right, you need to request a new form W-2 from your employer (that corrected form is called a W-2c).

Box b. Your employer's EIN is reported in box (b). An EIN is the employer's equivalent of your SSN.

Box c. Your employer's address is reported in box (c). This is the legal address of your employer which may or may not be where you work.

Box d. A control number is an internal number used by your employer. If your employer doesn't use control numbers, Box (d) will simply be blank.

Boxes e and f. Your full name is reported in box (e). It is supposed to reflect the name that is on your Social Security card. If your name is not exactly as it appears on your Social Security card, you may need a new form W-2; ask your employer if you are not sure. Your address is reported at box (f) and should reflect your mailing address, which could be a post office box. If your address on the form W-2 is not correct, notify your employer (you will not need a new form W-2, but your employer needs to update his or her records).

The right side of the form is used to report dollars and codes: W-2  Boxes 1-12

 Box 1 shows your total taxable wages, tips, prizes, and other compensation, as well as any taxable fringe benefits. Minus elective deferrals to retirement plans, pretax benefits, or payroll deductions. Since the figure does not include those amounts, it is not unusual for this amount - like the one in my example - to be less than the amounts included in boxes 2 and 3. This tends to be the number most taxpayers care about the most.

 Box 2 reports the total amount of federal income taxes withheld from your pay during the year. The elections on your form W-4 determine this amount, and it is based on your exemptions and any additional withholding. 

Box 3 and 5 are actually gross wages less any Section 125 Pretax deductions. This does not include retirement deductions which is why sometimes box 3 and 5 are higher than box 1.

Box 4 shows the total of Social Security taxes withheld for the year. Unlike federal income taxes, Social Security taxes are calculated based on a flat rate. The rate is 6.2%. The amount in Box 4 should, then, be equal to the amount in box 3 times 6.2%. Since you should not have more Social Security withholding than the maximum wage base times 6.2%, the amount in box 4 should not exceed $8,239.80. In my example, the figure is $50,000 x .062, or $3,100.00.

Box 5 indicates wages subject to Medicare taxes. Medicare taxes generally do not include any pretax deductions. That, combined with the fact that unlike Social Security wages, there is no cap for Medicare taxes, means that the figure in box 5 may be larger than the amounts shown in box 1 or box 3. It is likely the biggest number on your form W-2.

Box 6 shows the amount of Medicare taxes withheld for the year. Like Social Security taxes, Medicare taxes are figured based on a flat rate of 1.45%. For most taxpayers, this means that the figure in box 6 is equal to the number in box 5 times 1.45% (in my example, $50,000 x 1.45% = $725). Your employer must also withhold additional Medicare tax of .9% from wages paid to an individual earning more than $200,000, regardless of filing status or wages paid by another employer. Since your employer does not know your entire financial picture, you may have to pay more additional Medicare taxes than your withholding depending on filing status, compensation, and self-employment income.

Tips that were reported to your employer will be found in box 7. If this box is blank, it means that you did not report tips to your employer (unreported tips are still taxable).

Allocated tips reported in box 8 are those that your employer has attributed to you. Those tips are considered income to you.

Box 9 is no longer in use since the verification code pilot program has ended.

At box 10, your employer will report the total benefits paid on your behalf under a dependent care assistance program, including those that exceed the $5,000 exclusion (if the value exceeds $5,000, that excess will be reported in boxes 1, 3, and 5). Amounts that are less than $5,000 and are paid under a qualified plan are considered nontaxable benefits.

Box 11 is used to report amounts distributed to you from your employer's non-qualified deferred compensation plan (this amount is taxable). Don't confuse this with amounts contributed by you. That shows up in box 12.

Box 12 is the catch-all for information on form W-2. 

W-2 Box 12 Codes

Here, you will see all kinds of codes: if there are more than four items to be reported in box 12, your employer may use a separate form W-2 to report the additional items. Not all of the income coded at box 12 is taxable. Here's a quick rundown of the codes (if you have trouble reading them, you can find them in the instructions):

Some quick notes:

  • If you participate in an elective deferral program like a 401k plan, you'll see it reported using Code D. As explained earlier, these amounts will generally be included in box 3 and box 5, too, even if they are excluded from wages at box 1.
  • The cost of employer-sponsored health coverage (or health insurance paid for by your employer) is reported using Code DD. This amount is reportable under the Affordable Care Act, sometimes referred to as Obamacare, but it is not taxable to you. In most cases, this is only your significant medical benefit: separate dental or vision plan reporting is optional. Also optional? Health Reimbursement Arrangement (HRA) contributions. You will not see amounts paid into a Health Flexible Spending Arrangement (FSA) funded with pretax dollars; Health Savings Arrangement (HSA) contributions from you or your employer; or Archer Medical Savings Account (Archer MSA) contributions from you or your employer since those are not reportable.

Box 13 is not one box: it's a series of three boxes. Your employer will check the appropriate box if you are a statutory employee (employees whose earnings are subject to Social Security and Medicare taxes but not federal income tax withholding); if you participated in your employer's retirement plan during the year; or if you received sick pay under your employer's third-party insurance policy.

Box 14 Your employer reports anything here that doesn't fit anywhere else. Examples include state disability insurance taxes withheld, union dues, health insurance premiums deducted and nontaxable income. If you cannot figure out the amounts in this box, check with your payroll or human resources (HR) department: in most cases, the IRS will not be able to interpret these for you.

Finally, your state and local tax numbers are reported at the very bottom of the form W-2:W-2 Box 15-20

Box 15 includes your employer's state and state tax identification number. If you work in a state without a reporting requirement, this box (along with boxes 16 and 17) will be blank. If you had multiple withholdings in several states, more than one box will be filled.

If you are subject to state tax reporting, box 16 will show the total amount of taxable wages for state tax purposes.

If you have wages reported in box 16, box 17 will show the total amount of state income taxes withheld during the year. If you live in a state that has a flat state tax, you can double-check to make sure that your withholding is correct by multiplying the amount in box 16 by the flat tax rate.

If you are subject to local, city, or other state income taxes, those wages will be reported in box 18. If you have wages subject to withholding in more than two states or localities, your employer will furnish an additional form W-2.

If your wages in box 18 are subject to local, city, or other state income taxes, any amount of withholding will be reported at box 19.

Box 20 shows the name of the local, city, or other state tax being reported at box 19.

And that is it. You should receive your form W-2 by January 31, 2021.

Resource: Kelly Phillips Erb, Forbes Magazine, Jan. 30, 2020, “How to Read Your Form W-2 at Tax Time”.