{"id":11008,"date":"2023-02-04T09:49:00","date_gmt":"2023-02-04T14:49:00","guid":{"rendered":"https:\/\/blog.eztaxreturn.com\/?p=11008"},"modified":"2023-06-04T09:40:05","modified_gmt":"2023-06-04T14:40:05","slug":"tax-basics-understanding-your-w-2","status":"publish","type":"post","link":"https:\/\/staging.eztaxreturn.com\/blog\/tax-basics-understanding-your-w-2\/","title":{"rendered":"How Do I Read and Understand My W-2?"},"content":{"rendered":"\r\n

As soon as January hits, many employees\u00a0begin counting down the days until they receive their W-2.\u00a0 It\u2019s not the act of doing taxes that brings us joy, it\u2019s the possibility of getting a big refund<\/a>.\u00a0 While some people simply hand their W-2 over to an accountant, you can save time and money by doing your own taxes with ezTaxReturn.com<\/a>.\u00a0 Either way, it\u2019s always a good idea to have at least a basic understanding of the information listed on your W-2.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

What is a W-2?<\/strong><\/h2>\r\n\r\n\r\n\r\n

A W-2 is a tax form used to report employee wages and taxes withheld for the year.\u00a0 You can expect to receive a W-2 if you earned at least $600 or had taxes deducted from any amount of income.\u00a0 Don’t make the mistake of thinking this document is just for your own records.\u00a0 If you meet the filing requirements, you\u2019ll need to use the information to prepare a tax return.\u00a0 Most employees will receive their W-2 by January 31st<\/sup> as required by the IRS.\u00a0 This gives you more than enough time to file by the\u00a0April 18th <\/sup>tax deadline.\u00a0 However, if you don\u2019t get yours by mid-February, we recommend contacting your employer.<\/p>\r\n\r\n\r\n\r\n

When you have your W-2 handy, look it over to make sure the information is correct. This is important because it affects more than just your taxes. A copy of your W-2 is also sent to the SSA<\/a> and used to determine future Social Security benefits. Any mistakes can cause you to receive lower payments when you retire.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Boxes a-f:\u00a0 Your personal and employer information<\/strong><\/h3>\r\n\r\n\r\n\r\n

Boxes a-f of your W-2 contains identifying information for both you and your employer.\u00a0 Here you\u2019ll find your name, address, tax ID number and similar details for your employer. If you work at a company with multiple locations, there\u2019s a good chance that the employer address will be different than the location you\u2019re used to. It\u2019s not a big deal, it\u2019s just their legal address. Additionally, your control number may be left blank. This number is only used by your employers payroll department and isn’t mandatory.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Box 1 \u2013 Wages, tips, other compensation<\/strong><\/h3>\r\n\r\n\r\n\r\n

Box 1 represents your taxable income for the year.\u00a0 This includes your wages, tips and other compensation.\u00a0 Elective deferrals such as 401k and 403b contributions are excluded from this figure.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Box 2 \u2013 Federal income tax withheld <\/strong><\/h3>\r\n\r\n\r\n\r\n

Every time you get paid, a portion of your check is used to pay federal taxes.\u00a0 Box 2 shows the total amount that was withheld during the year.\u00a0 Paying more than your fair share will result in you getting a refund when you file your tax return.\u00a0 On the other hand, not paying enough means you’ll owe Uncle Sam.\u00a0 This is why it’s important to complete and submit a new Form W-4<\/a> to your employer whenever your life changes.<\/p>\r\n\r\n\r\n\r\n

\r\n
Start for FREE!<\/a><\/div>\r\n<\/div>\r\n\r\n\r\n\r\n
\u00a0<\/div>\r\n\r\n\r\n\r\n

Boxes 3 and 4:\u00a0 Social security wages and taxes withheld<\/strong><\/h3>\r\n\r\n\r\n\r\n

As if federal taxes weren’t enough, workers must also pay Social Security taxes throughout the year.\u00a0 In Box 3, you’ll find the portion of your income that’s subject to Social Security taxes.\u00a0 This amount may be larger than what appears in Box 1 because it’s calculated before any payroll deductions are made.\u00a0 For income year 2022, the maximum social security wage base is $147,000.\u00a0 Box 4 displays the total amount of Social Security taxes that were withheld.\u00a0 To calculate this figure, your income was multiplied by a flat rate of 6.2%.\u00a0 Since the maximum wage base is $147,000, your Box 4 amount cannot exceed $9,114 ($147,000 X 6.2%).<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Boxes 5 and 6 \u2013 Medicare wages and tips and taxes withheld<\/strong><\/h3>\r\n\r\n\r\n\r\n

Box 5 of your W-2 shows the portion of your income that’s subject to Medicare taxes.\u00a0 Unlike with Social Security taxes, there isn\u2019t a wage limit.\u00a0 Don\u2019t be alarmed if the figure in Box 5 is larger than what appears in Box 1.\u00a0 Certain deductions that are excluded from regular taxes still face Medicare taxes.\u00a0 This includes deferred compensation, retirement contributions and other fringe benefits.\u00a0 Any money that was deducted for Medicare taxes is depicted in Box 6.\u00a0 Typically, Medicare taxes are 1.45% of your Medicare income.\u00a0 However, if you earn more than $200,000 a year, expect to pay an extra 0.9% for Additional Medicare Taxes<\/a>.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Boxes 7 and 8 \u2013 Social security tips and allocated tips<\/strong><\/h3>\r\n\r\n\r\n\r\n

Any tips you earn count towards your taxable income and must be reported on your tax return.\u00a0 Box 7 reflects the amount of tip income you reported to your employer.\u00a0 If you don\u2019t earn any tips, this box will obviously be empty.\u00a0 Box 8 reflects your allocated tips which is the amount assigned to you by your employer.\u00a0 This is in addition to the amount reported in Box 7.\u00a0<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Box 9<\/strong><\/h3>\r\n\r\n\r\n\r\n

By now, you probably noticed that Box 9 is darker than the rest of the form.\u00a0 That’s because this section no longer serves a purpose.\u00a0 Once upon a time, it was used to reflect advanced payments of the Earned Income Tax Credit (EITC)<\/a>.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Box 10 \u2013 Dependent care benefits<\/strong><\/h3>\r\n\r\n\r\n\r\n

Received dependent care benefits from your employer?\u00a0 If so, the total amount you received will be reflected in Box 10 of your W-2.\u00a0 Any amount over $5,000 will also be included in box 1.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Box 11 \u2013 Nonqualified plans<\/strong><\/h3>\r\n\r\n\r\n\r\n

This section reports any distributions you received from a non-qualified plan or non-governmental section 457(b) plan.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Box 12 \u2013 Codes<\/strong><\/h3>\r\n\r\n\r\n\r\n

Various types of compensation and benefits are reported in box 12. Typically, this box will contain a single or double letter code followed by a dollar amount.\u00a0 You can easily find the explanation of each code by flipping to the back of your W-2.\u00a0 A reference guide for box 12 codes can also be found on page 19 of the 2021 General Instructions for Forms W-2 and W-3.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n

Box 13:\u00a0 Checkboxes<\/strong><\/h3>\r\n\r\n\r\n\r\n

Depending on your situation, you may have three boxes checked off in this section.\u00a0 The options include:<\/p>\r\n\r\n\r\n\r\n