What Do the Checkboxes in W-2 Box 13 Mean?
Understand the special classifications in W-2 Box 13 and how they can affect your income reporting and eligibility for certain tax deductions.
Form W-2, the annual Wage and Tax Statement, summarizes your earnings and the taxes withheld from your pay. Box 13 contains three specific checkboxes that can have implications for how you file your taxes. These checkboxes are only marked under specific circumstances defined by the Internal Revenue Service (IRS). Understanding whether the “Statutory employee,” “Retirement plan,” or “Third-party sick pay” box is checked is part of accurately preparing your income tax return.
The Statutory Employee Checkbox
The “Statutory employee” checkbox identifies a unique worker classification that blends attributes of an independent contractor with those of a common-law employee. A statutory employee is treated as an independent contractor for income tax purposes but as an employee for Social Security and Medicare taxes. This means that while an employer withholds Federal Insurance Contributions Act (FICA) taxes, they generally do not withhold federal income tax.
The IRS defines four categories of workers who can be classified as statutory employees:
- Drivers who distribute beverages (other than milk), meat, vegetable, fruit, or bakery products, or who pick up and deliver laundry or dry cleaning.
- Full-time life insurance sales agents whose principal business activity is selling life insurance or annuity contracts for one company.
- Individuals who work from home using materials or goods supplied by the employer that must be returned.
- Full-time traveling or city salespeople who solicit orders from wholesalers, retailers, or contractors on behalf of a single principal company.
The tax consequence of this checkbox being marked is the method of reporting income. The wages shown in Box 1 of the W-2 are reported on Schedule C (Form 1040), Profit or Loss from Business, instead of the standard wage line of Form 1040. This is advantageous because it allows the taxpayer to deduct their work-related expenses directly against that income on Schedule C. Deductible expenses can include costs like vehicle mileage, supplies, and professional dues, which can lower the individual’s adjusted gross income (AGI) and overall tax liability.
The Retirement Plan Checkbox
The “Retirement plan” checkbox in Box 13 is marked if you were an “active participant” in an employer-sponsored retirement plan at any point during the tax year. This includes plans such as a 401(k), 403(b), SEP IRA, SIMPLE IRA, or a defined-benefit pension plan. Being an active participant means that you or your employer made contributions to your account during the year, or in the case of a defined-benefit plan, you were covered under the plan.
The impact of this checkbox relates to your ability to deduct contributions made to a traditional Individual Retirement Arrangement (IRA). While anyone with earned income can contribute to a traditional IRA, the tax-deductibility of those contributions can be limited if you are an active participant in an employer’s plan. The deduction is phased out based on your modified adjusted gross income (MAGI) and filing status.
For the 2025 tax year, the IRA deduction for a single filer covered by a workplace retirement plan is phased out for those with a Modified Adjusted Gross Income (MAGI) between $79,000 and $89,000. For those married filing jointly, where the contributing spouse is covered by a workplace plan, the phase-out range is $126,000 to $146,000. If you are not covered by a workplace plan but your spouse is, the phase-out range for a deductible IRA contribution is $236,000 to $246,000. If your income falls within the phase-out range, you can take a partial deduction; if it exceeds the upper limit, no deduction is allowed.
Even if your traditional IRA contribution is not deductible, you must still report it on IRS Form 8606, Nondeductible IRAs. This form tracks your non-deductible contributions, which creates a “basis” in your IRA. Tracking this basis ensures that when you later take distributions from the IRA, you will not be taxed on the portion of the distribution that represents your non-deductible contributions.
The Third-Party Sick Pay Checkbox
The “Third-party sick pay” checkbox in Box 13 indicates that you received sick pay benefits from a source other than your direct employer. These payments are typically made by an insurance company that administers your employer’s short-term or long-term disability plan. When you are unable to work due to illness or injury, the insurer pays you directly, and these payments are often considered taxable income.
The purpose of this checkbox is to help you reconcile the income on your W-2, as the taxable portion of the sick pay is generally included in the wages reported in Box 1. The checkbox serves as a notification that a portion of your reported income came from an outside payer. Generally, you do not need to take any special action on your tax return simply because this box is checked. The income is already included in your total wages, and any applicable Social Security and Medicare taxes have been handled.