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3 key things to know about the W-2 form

3 key things to know about the W-2 form

Form W-2, or the Wage and Tax Statement, is an important document that reports the employee’s income and withheld tax to the IRS. These reports are then sent to the employees every January from employers who pay an individual at least $600 annually. The W-2 is crucial in helping one file their tax returns correctly, as it enlists contributions, insurance, benefits, and many other essential components. Read on to learn more about this form.

Reading the W-2
The form has several components that one needs to fill in correctly. Here’s a simple breakdown:

  1. Box 1 – Total taxable wages, including tips, prizes, and other compensation.
  2. Box 2 – Federal income taxes the employer withholds from one’s pay.
  3. Box 3 – Total wages subject to Social Security tax.
  4. Box 4 – Total Social Security tax withheld from pay.
  5. Box 5 – Wages that are subject to Medicare tax.
  6. Box 6 – Total Medicare tax withheld from pay.
  7. Box 7 – Tips reported to the employer.
  8. Box 8 – Total amount of other tips allocated by the employer.
  9. Box 9 – This box is no longer in use.
  10. Box 10 – Amount of dependent care benefits paid by the employer.
  11. Box 11 – Total amount of money distributed during the year from the employee’s deferred compensation plan.
  12. Box 12 – Here, the employer can provide more detailed information about all the pay reported in Box 1.
  13. Box 13 – This section indicates whether the earnings are subject to Social Security, Medicare taxes, etc.
  14. Box 14 – Any other reports and details that do not fit anywhere else are added here.
  15. Box 15 – Employer’s state and tax identification numbers.
  16. Box 16 – Amount of taxable wages for state tax purposes.
  17. Box 17 – Total amount of state income taxes withheld during the year.
  18. Box 18 and 19 – Any other state income taxes and withholding
  19. Box 20 – Name of the local, city, or other state tax reported in Box 18 and 19.

Due Date
Employers are expected to furnish W-2 forms to the employees and the IRS on or before January 31. Failing to do so may result in penalties.

Copies
The employer is expected to make multiple copies of the W-2 form, of which three are sent to the employee. Copy B is used to report federal income tax, Copy 2 is used to report state, city, and other local income tax, and Copy C is used for maintaining personal records.