How Much Did I Make? How to Read Your W-2

The Form W-2, officially known as the Wage and Tax Statement, is an annual document employers issue to their employees. It details wages earned and taxes withheld during the calendar year, serving as a record for both the employee and the IRS. Employers must send W-2 forms by January 31st each year. This document is essential for preparing federal, state, and local income tax returns.

Identifying Your Earnings

Box 1, labeled “Wages, tips, other compensation,” provides the total taxable income for federal income tax purposes. This figure includes an employee’s salary, reported tips, bonuses, and other taxable compensation, such as certain fringe benefits. However, Box 1 does not include certain pre-tax benefits, like contributions to a 401(k) plan or health insurance premiums, which reduce taxable income.

Other boxes on the W-2 provide additional details about earnings that are subject to specific taxes. Box 3, “Social Security wages,” shows the income subject to Social Security tax, while Box 5, “Medicare wages and tips,” reports income subject to Medicare tax. These amounts may differ from Box 1 because Social Security wages have an annual wage base limit, meaning only earnings up to a certain amount are taxed for Social Security. Conversely, there is no wage limit for Medicare taxes, so all Medicare wages are subject to this tax. Box 8, “Allocated tips,” if applicable, indicates tip income assigned to an employee by their employer, which is not included in Boxes 1, 3, or 5.

Understanding Your Withholdings

The W-2 form itemizes the various taxes that have already been withheld from an employee’s pay throughout the year. These withheld amounts represent payments made towards an individual’s tax liabilities, not the final tax due. Box 2, “Federal income tax withheld,” shows the total amount of federal income tax deducted from paychecks. This figure is determined by the information provided on an employee’s Form W-4.

Box 4, “Social Security tax withheld,” indicates the total amount of Social Security tax deducted from wages. Similarly, Box 6, “Medicare tax withheld,” reports the total amount of Medicare tax deducted.

State and local income tax information is found in Boxes 15 through 17. Box 15 lists the state and the employer’s state identification number. Box 16, “State wages, tips, etc.,” details the portion of wages subject to state income tax, which may differ from the federal taxable wages in Box 1. Finally, Box 17, “State income tax withheld,” shows the total state income tax deducted from pay. If applicable, local wages and local income tax withheld are reported in Boxes 18 and 19.

Other Important Information

The W-2 form contains additional boxes and codes that provide other financial information relevant for tax purposes. Boxes a through f typically display identifying information for both the employee and the employer, including the employee’s Social Security Number and the employer’s identification number (EIN). Box d may contain a control number, an optional field used by some employers for internal record-keeping.

Box 12 uses various codes to report different types of compensation or benefits that impact taxable income. For instance, Code D indicates elective deferrals to a 401(k) retirement plan, while Code W reports employer and employee contributions to a Health Savings Account (HSA). Code DD represents the cost of employer-sponsored health coverage, which is for informational purposes only and is not taxable. These codes clarify how certain benefits or contributions affect an individual’s overall tax picture.

Box 13 contains three checkboxes: “Statutory employee,” “Retirement plan,” and “Third-party sick pay.” If “Statutory employee” is checked, it means the individual’s wages are subject to Social Security and Medicare taxes but not federal income tax withholding. A checked “Retirement plan” box indicates participation in an employer-sponsored retirement plan. “Third-party sick pay” indicates that sick pay was received from a source other than the employer, such as an insurance company. Box 14 is a catch-all for other information an employer chooses to report, such as state disability insurance taxes, union dues, or educational assistance payments.

Using Your W-2 for Tax Filing

The information presented on your W-2 form is foundational for preparing your annual tax returns. It serves as the primary source document for reporting income and tax withholdings to the federal government, as well as to state and local tax authorities where applicable. The values reported in specific boxes are directly transferred to the corresponding lines on tax forms, such as Form 1040 for federal income tax.

It is important to accurately input all relevant information from your W-2 onto your tax forms to ensure correct tax calculation. You should have your W-2 form from each employer by January 31st, as it is generally required before you can complete and submit your tax returns. While you are still obligated to file taxes even without a W-2, having the document readily available streamlines the process and helps prevent errors.