Closer Look at Your W2

Ever wondered what does a W2 look like?

Form W-2 is an IRS tax form used to report wages, salary, and other compensation paid to employees and the taxes withheld from them. It reports how much an employee earned and the amount of federal, state, and local taxes withheld from all paychecks. Many tax documents can be confusing so lets break down each box and take a closer look.

Basic Information on Form W-2

An employee’s personal information and the employer’s contact information is found on the form. If the employer uses a PEO here the employee will see the PEO listed as the employer. What is a PEO? Find out more here. The PEO reports taxes on behalf of the company.

The employee’s social security number and address is listed next. Encourage your employees to double-check this information. When there are errors it can causes fines and penalties.

Wages and Withholding

The employee’s financial information is recorded within the numbered boxes. Below you can find what each box means and what information is required. Most employees will only have to worry about boxes 1-5 so let’s address those first:

  • Box 1: Wages, tips, other compensation: Total taxable income for the entire year. If you did not work the whole year, record from the first day of work. 
  • Box 2: Federal income tax withheld: The amount of money that your employer withheld for federal income taxes.
  • Box 3: Social security wages: This is FICA on a W2. What is FICA on my W2? Well, it’s the amount of income that social security/FICA is subject to tax. Keep in mind it’s not income tax because there is a maximum amount that can be taxed by the FICA in a year.
  • Box 4: Social security tax withheld: Total amount of social security tax that was withheld by the federal government. There is a maximum amount that can be withheld because there is a cap.
  • Box 5: Medicare wages and tips: Amount of income that can be taxed for medicare. But there is no cap on this so the amount can vary.

If you have received any additional types of income during the business year you will have to address the additional boxes below.

  • Box 12: Payments related to employee 401(k) contributions, employee 501(c)(18)(D) tax-exempt organization plan, non-taxable portion of sick pay, cost of employer-sponsored health coverage, employer contributions to an HSA, to name a few.
  • Box 13: Box is a combination of 3 boxes wherein you state if you are a statutory employee, participated in your employer’s retirement plan (401(k)), or if you received any sick pay under a third party insurance carrier.
  • Box 14: Anything you did not include previously in another box.
  • Box 15: Employer’s state and state tax ID number.
  • Box 16: Total amount of taxable wages for state taxes.
  • Box 17: Total amount of state income taxes withheld by the state.
  • Box 18: Wages subject to local, city, or state income taxes.
  • Box 19: Total local, city, and state income taxes withheld by the state.
  • Box 20: Name of the local, city, or other state tax being reported in the above box 19.

The IRS requires every employer to issue an employee their W-2 no later than January 31st.

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