Sometimes understanding the W-2 boxes is confusing. This is an attempt to simplify the form W-2 for you.
Form W-2 is an end of the year tax document issued by a trade or business to all its employees. It is issued to every person who has been employed by a trade or business for remuneration (cash or non-cash).
The trade or the business is under an obligation to file form W-2 for each employee (even if the employee is related to the employer). The W-2 form reports the total wages of the employee for the year and the federal, state and local taxes withheld.
The employer should issue the W-2 latest by January 31st of the next year. For example, for financial year 2023 the W-2 should be issued no later than January 31st, 2024. The employees then can file their taxes based on the information provided on the form W-2. Issuing timely W-2 gives the employees ample time to file their returns before the due date of filing tax returns which is April 15th of the year.
There are many boxes on the form W-2. Every box on the form is assigned a specific category. Here is a simple explanation of each box.
Box a: This box is assigned to furnish the Social Security number of the employee.
Box b: This box is for the employer’s EIN (Employer Identification Number). EIN is a 9-digit number assigned by IRS to the trade and businesses and is required while filing the tax returns or issuing W-2’s.
Box c: This box is for Employer’s name address and zip code
Box d: This box is for the control number. This is not a mandatory number and if it is not present on your W-2 there is no need to worry.
Box e: This box is for furnishing employee name. Make sure your name is correct in the employer records and matches the name as entered on the SSN card.
Box f: This box is for employee’s address and zip code. Make sure the employer has your latest address before the end of the year so that you can get your W-2 on time by mail. It is also important for calculating correct state and local taxes.
Box 1: This box contains sum of all the wages, tips and other compensations received by the employee from the specific employer who is issuing the W-2. Taxable fringe benefits such as group term life insurance are included here. But Box 1 does not include any pre-tax benefits, such as savings contributions to a 401(k) plan, 403(b) plan or health insurance. A person can receive more than one W-2 during a tax year, provided they are working for two or more different companies (trade or businesses) during the year.
Box 2: This box contains the total federal income tax withheld from the employees’ wages during the year. The federal income tax is withheld as a percent of the total wages. The percentage rate is based on the tax bracket in which the wages fall during the year.
Box 3: This box contains the total social security wages. Social security wages are an employee’s earning that are subject to federal social security tax withholding. These wages include qualified employee wages and self-employment income. Employers are bound to deduct this tax even if the employee doesn’t expect to qualify for social security benefits. Social security wages have a maximum taxable income limit. The maximum taxable income limit changes annually to adjust for inflation and to provide reasonable benefits to higher wage earners. The maximum taxable income limit for 2023 is $160,200.
Box 4: This box contains the total social security tax withheld. The total social security taxes withheld from the employee wages is 6.2% of the maximum taxable income.
Box 5: This box contains the total Medicare wages and tips. Medicare wages do not have a maximum taxable income limit.
Box 6: This box contains the total Medicare tax withheld. The total Medicare tax withheld is 1.45% of the first $200,000 of an employee’s wages and an additional 0.9% on any amount which exceeds $200,000.
Box 7: This box is for the social security tips. Tips are optional payments determined by a customer that employee receives from customers. It includes tips paid by cash, credit card, debit card, gift card or any other electronic payment method.
Box 8: Allocated tips. These are tips that the employer assigns to the employee in addition to the tips reported by the employee for the year. Allocated tips are non-taxable.
Box 9: Advance earned income credit was reported on Box 9 till 2010. Since, advance EIC ended in 2010, this box should be empty. Advance EIC payments were made by the employer to an employee in anticipation of the employee being eligible for the EIC.
Box 10: This box shows all the amount the employer paid on behalf of the employee for the dependent care. Any amount over $5000 paid for dependent care is also included in Box 1.
Box 11: All the amounts paid by the employer into non-qualified plans go here. It’s a type of retirement saving plan which falls out of ERISA (Employment Retirement Income Security Act) guidelines and are exempt from testing which is required with qualified retirement saving plans like 401 K and 403 b. A non-qualified plan mainly acts as a tool for recruitment and retention of certain employees and key executives. To know about types of non-qualified plans check here.
Box 12: The most common Box 12 codes as listed on the W-2 are 12a, 12b, 12c and 12d. there are many additional codes running up to 12HH which can be mentioned or added to the W-2, depending on specifics of each trade or business and type of distribution. Here are the explanations for codes 12 a to d. For the rest of the codes, you can check here.
- 12a: Uncollected Social Security tax or Railroad Retirement Tax Act (RRTA) tax on tips are reported on box 12a.
- 12b: Uncollected Medicare tax on tips is reported on box 12b.
- 12c: Taxable costs of group-term life insurance over $50,000 is reported on box 12c. This is for information purposes only.
- 12d: The elective deferral amounts under a Section 401(k) cash or arrangement plan are reported on box 12d. This includes a SIMPLE 401(k) arrangement.
Box 13: There are 3 check boxes in box 13. Statutory employee, Retirement Plan and Third party pay.
- Statutory employee is an individual contractor treated like an employee, if this box is checked then you report the income here
- Retirement Plan is checked on the W-2 if the employee is an active participant in a qualifying retirement plan
- Third party pay is generally checked on the W-2 if the payments for sickness or disability were paid by a third-party insurance company and not the employer
Box 14: Additional tax information are reported by the employer in box 14. This could include union dues, employer paid tuition or after-tax contributions to a retirement plan. A short description should be included describing the type of payment.
Box 15: This box lists the state for which the employer withheld the taxes and the state to which the employer remitted the taxes. It also states the employer’s state ID number.
Box 16: The state wages and tips etc., are reported on box 16.
Box 17: Total income tax withheld from the state wages in reported on box 17
Box 18: The local wages and tips etc., are reported on box 18
Box 19: Total income tax withheld from the local wages in reported on box 19
Box 20: This box states the locality name for which the taxes are deducted.
Additional Notes:
There are 5 different copies of the W-2
Copy A: For Social Security administration
Copy 1: To be filed with state, city or local tax department
Copy B: To be filed with employee’s federal tax return
Copy C: For Employee’s records
Copy 2: To be filed with Employee’s State City or Local Income Tax return
Copy D: This copy is for the employer
