The Explanation of the W-2

The W-2 is a tax form that shows taxable wages paid taxes withheld from your pay for the year. This form is required to file your federal taxes. Employers are required by IRS to report employees salary and wage information of form W-2. W-2 form is only received if you are an employee but if you are an independent contractor Form 1099 is received instead of form W-2.

Employers are required to send W-2 forms to their employees by 31st January following the close of thecurrent tax year. W-2 Form contains 20 boxes that are explained in detail below.

Box 1- Wages, Tips, and other Compensations:

This is gross taxable wages minus pre-tax items such as health savings, PERPS, medical premiums, etc.

Box 2- Federal Income tax Withheld:

This box contains total federal income tax that is withheld from your pay.

Box 3- Social Security Wages:

This is calculated as federal gross taxable income plus retirement funds. Social security wages subject to tax has an annual limit. For 2015, this limit is $118500.

Box 4- Social Security Tax withheld

This is social security tax that is withheld from your pay. Again here is theannual maximum for social security tax each year. For 2015 this amount is $7,347 (6.2% on earnings up to $118,500).

Box 5 - Medicare wages & Tips:

Total Wages minus items subject to Medicare taxes such as medical premiums, health savings account and parking. There is no annual tax limit for Medicare wages.

Box 6 - Medicare tax withheld:

This total amount of Medicare tax that has been withheld. The current rate for Medicare tax is 1.45% for the employee.

Box7- Social Security Tips:

This is total security tips that are subject to social security tax.

Box 8- Allocated Tips:

Hourly basis pay is recognized as a wage by IRS. If you do not receive allocated tips, simply add Box1 and Box

Box 9 - Advance EIC Payments:

This box contains advance earned income from your form 1044.

Box 10- Dependent Care Benefits:

This box contains thetotal amount of dependent care withheld and is reflected in Box 1.

Box 11- Nonqualified Plans:

This has been reflected in box 1 if it is some compensation received under

Box 12- Box 12 Codes:

  • Code E is elective deferrals according to IRS section 403b
  • Code G is elective deferrals according to IRS Section 457b
  • Code P any moving reimbursements paid to the employee directly.
  • Code DD any health coverage reported by the employer
  • Code BB any Roth contribution under section 403.
  • Box 13- Retirement Plan:

    Any retirement plan that employee is enrolled into.

    Box 14-Others

    Any additional information can be provided here.

    Box 15- State Name

    Box 16- State wages & tips

    Box 17- Income tax of state

    Box 18- Local area Wages

    Box 19- Local area income tax

    The W-2 form is distributed by the employer in January. It is in red color, and only original red color form is acceptable. No printed form or scanned form is acceptable by IRS.

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