What is a W-2?

The closer tax season comes, the more you’ll hear about a W-2. Many people file this form with the IRS to properly report their earnings. This form simplifies the process and avoids unnecessary troubles. So, what is a w2 exaclty? We’re sharing everything you need to know about the W-2 Form so you approach it with confidence.

What is the purpose of a W-2 Form?

W-2 is short for wage and tax statements. All employers will file a Form W-2 for each of their employees. These forms detail an employee’s salary, wage, additional compensation, and taxes withheld from the employee’s paycheck. 

Who files a Form W-2?

Employers must file a Form W-2 for every employee that received a salary, wage, or other forms of compensation. This form is essential for completing federal and state taxes. Employers often send a W-2 for last year’s activity to their employees at the start of the year.

What information does a W-2 include?

A Form W-2 contains information about your employer and what you earned with them. You can expect to find the following details on your Form W-2:

• Employment identification number

• Employer state ID number

• Details about your earned income

• Company contributions to the 401(k)

• Company contributions to a health savings account

• Health care premiums

• Tax withholding info

You may find additional details on your Form W-2 depending on the employer and how you get compensated.

Difference between a W-2 and 1099 Form

Everyone gets a Form W-2 or a 1099 Form. The form you receive depends on the nature of your work. Employees will receive a W-2 Form, whereas independent contractors and contract workers receive 1099 Forms. 

Some people receive both forms because they work at a company and do a side hustle in the evening. You can have several 1099 Forms if you work for multiple companies as a contractor. Unless you work at multiple companies as an employee, you will only receive one W-2 Form.

How do I get my Form W-2 and when?

Most employees receive their Form W-2 at the beginning of the year. You can contact your copy about receiving your W-2 faster or if you lost it. Workers can also pay a fee to the IRS to obtain the form. It’s best to monitor your mailbox towards the end of January and early February.

How to read a Form W-2

The Form W-2 contains several boxes that can feel overwhelming at first glance. However, it gets easier to read with some practice. We’ve provided the highlights so you can navigate through each box.

Boxes A through F

These boxes contain information about your employer, such as their identification number. Boxes e and f contain the employee’s name and location.

Boxes 1 and 2

Box 1 contains taxable info such as your salary, tips, and other compensation. Box 2 represents earnings withheld for tax purposes on your behalf. Think of it as a discount on taxes you accumulated with each weekly paycheck. The withheld funds got nixed from your payout for this occasion.  

Boxes 3 and 4

Boxes 3 and 4 provide the same information as Boxes 1 and 2 for social security purposes. Box 3 contains social security wages, while Box 4 contains social security funds withheld for tax purposes.

Boxes 5 and 6

Boxes 5 and 6 show medicare and tips using the same format as Boxes 3 and 4. Box 5 contains earnings diverted to medicare, while Box 6 shows withheld taxes. Boxes 3 and 5 may not always add up to Box 1 due to 401(k) contributions. These contributions defer income and can lead to a difference between these totals.

Boxes 7 and 8

Some employees, such as waiters, earn money through tips. Boxes 7 and 8 allow employers to list how much you earned in tips and how much got withheld for tax purposes.

Box 9

The grayed-out box once helped employers report benefits that no longer exist. No one fills it in anymore.

Box 10

Some employers pay for an employee’s dependent care expenses. Employers put those costs in Box 10.

Box 11

Employers list deferred compensation from a non-qualified plan.

Box 12

Employers list additional compensation and tax deductions not covered in the previous boxes. These boxes will often contain contributions to your 401(k) and HSA plans. You may also find group life insurance costs in Box 12.

Box 13

This box lets employers identify as a statutory employee, someone who participated in an employer’s retirement plan, or somebody who had a third party cover their sick pay. Statutory employees are not subject to federal income tax withholding, meaning their employers don’t have to withhold any income from them in preparation for tax season.

Box 14

Any critical information that has not yet been addressed will be placed inside of Box 14. These details range from insurance premiums, union payments, and any other relevant activities.

Boxes 15-20

The majority of the W-2 Form will address federal taxes. Employers use these final boxes for state and local taxes. Employers can use these boxes to report two states and two localities, but they’ll need to give you an additional Form W-2 to cover additional states.

What to do if your W-2 is wrong

No one’s perfect, and mistakes can happen when filling out your W-2 Form. In order to prevent avoidable errors, carefully review the document to ensure that all of the details are correct. 

If you spot an error, reach out to your employer as soon as possible. The employer will then correct the mistake so that you can file your taxes. It’s best to review this form upon receiving it as detecting a mistake early on can give you and your employer more time to resolve the issue.

Mastering the W-2 Form

The W-2 Form is an excellent ally during tax season. It details your income, earnings that were withheld, and other details that you need to know about in order to simplify tax season. Check your W-2 Form for any mistakes and hire a professional to guide you through your taxes.

FAQ

What is a W-2 Form used for?

Employers use a W-2 Form to provide the IRS with the taxable income and other tax-related details on part of their employees.

What is the difference between a W-2 and a W-4?

The W-2 Form details earnings and income that was withheld for taxes whereas the W-4 Form instructs employers about how much income they must withhold.

Do you get money from a W-2?

You can get money back via your W-2 Form if you overpaid for taxes.