Taxes

What You Need To Know About Your Form W-2 This Tax Season

Chances are that when you get your paycheck, you don’t look closely at anything beyond the net pay—the amount deposited into your account. But your Form W-2, Wage and Tax Statement? That’s a different story. Tax season is the first—and often only—time during the year that many taxpayers seriously consider how much money is taken out of their paychecks.

(Admit it: the total tax withheld always gives you a start.)

The amount of information on Form W-2 can be overwhelming. But whether you’re typing those numbers into a tax software program or handing the form over to your tax professional, you should have a basic understanding of how it affects your bottom line. Here’s what you need to know about your Form W-2 for the current tax season.

Employees Only

An employer will issue a Form W-2 to you if you are an employee. You’ll receive something different—Form 1099—if you’re an independent contractor. The form you receive at tax time should not be a surprise.

Reporting Criteria

An employer must issue you a Form W-2 if you were paid at least $600 in cash or cash equivalent during the year, including taxable benefits. It doesn’t matter how many hours you worked, or how long you were employed. If you are an employee (part-time or full-time, seasonal or permanent), and you’ve received at least $600, your employer has a reporting obligation.

There are two exceptions to the $600 rule:

  • If any taxes are withheld, including those for Social Security or Medicare, your employer must issue you a Form W-2 no matter how much you were paid.
  • If you would have been subject to withholding if you had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, your employee must issue you a Form W-2 no matter how much you were paid.

Don’t be alarmed if you were paid less than $600—and didn’t meet an exception—and still received a Form W-2 this tax season. Sometimes, an employer will issue a Form W-2 to all employees because it’s easier for them.

Due Date

Employers must furnish you a Form W-2 by Jan. 31, 2023. For purposes of the rule, your employer will meet the “furnish” requirement if it’s appropriately addressed and mailed on or before the due date.

Copies

Your employer is required to prepare several copies of Forms W-2. Three of those copies will land in your mailbox:

  • Copy B is used to report your federal income taxes and is generally filed with your federal income tax return unless you file electronically. In that case, you must provide your preparer with Copy B, but you don’t typically need to forward it to IRS.
  • Copy 2 is used to report your state, city, or local income tax and is filed with the relevant tax authorities.
  • Copy C is for your records.

Yes, it’s a lot of paper. If you want less paper and your employer has an appropriate system, you can receive your forms electronically. To do this, you must expressly consent—your employer may not send Form W-2 electronically to any employee who doesn’t agree or has revoked consent.

Reporting Year

Your Form W-2 must reflect wages paid during the calendar year. For example, if you worked from Dec. 18, 2022, through Jan. 3, 2023, and were paid on Dec. 25, 2022, and Jan. 10, 2023, respectively, you will receive two Forms W-2: one for the days you were paid in 2022 and one for the days you were paid in 2023.

What about if you worked from Dec. 18, 2022, through Dec. 31, 2022, but were paid on Jan. 3, 2023? All of those wages will be reported on your 2023 Form W-2.

A Look At The Form

So, what shows up on Form W-2? Here’s a look.

Personal Information

The left side of the form is used for reporting personal information:

Your Social Security Number (SSN) is reported in box a. It used to be the case that your entire SSN would appear in this box. That’s no longer the case. Your employee may now truncate your SSN on your copies of Forms W-2—that means that the first five digits of the nine-digit number may be replaced with Xs or asterisks (like XXX-XX-1234).

Your employer’s EIN—the equivalent of a company’s SSN—is reported in box b.

Your employer’s address will appear in box c. This is your employer’s legal address which may or may not be where you work.

A control number is an internal number used by your employer or your employer’s payroll department. If your employer doesn’t use control numbers, it’s not a big deal: Box d will simply be blank.

Boxes e and f appear as one big block on Form W-2. Your full name is reported in box e and should be the name on your Social Security card. If your name doesn’t appear here exactly as it appears on your Social Security card, you may need a new Form W-2. Form W-2 shouldn’t reflect prefixes or honorifics like “Dr.,” or “Esq.” Even though there’s a “Suff” box for suffixes like “Jr.” and “Sr.,” they shouldn’t be here unless the suffix appears on your card.

If your name has changed, you’ll need to get a new Social Security card from the SSA office—the name on your Form W-2 should still reflect the name on your existing card until you receive a corrected version.

Your mailing address will appear in box f. If your address on Form W-2 isn’t correct, notify your employer—you won’t need a new Form W-2, but your employer needs to update their records.

Wages and Withholding

Box 1 will reflect your total taxable wages, tips, prizes, and other compensation, as well as any taxable fringe benefits. It will not include elective deferrals to retirement plans, pretax benefits, or payroll deductions. Since the figure doesn’t include those amounts, it’s not unusual for this amount to be less than the amount in box 3.

Box 2 reports the total federal income taxes withheld from your pay during the year. The elections on your Form W-4 determine this amount, and it’s based on your exemptions and any additional withholding.

Box 3 shows your total wages subject to the Social Security tax. This figure is calculated before any payroll deductions, which means that the amount in box 3 could be higher than the number reported in box 1. It could also be less than the amount in box 1 if you’re a high-wage earner, wages subject to Social Security tax cannot exceed the maximum Social Security wage base. For 2022, that amount is $147,000. If you have more than one job, the cap still applies.

Box 4 shows the total of Social Security taxes withheld for the year. Unlike federal income taxes, Social Security taxes are calculated based on a flat rate. The rate is 6.2%. The amount in Box 4 should be equal to the amount in box 3 times 6.2%. Since you should not have more Social Security withholding than the maximum wage base times 6.2%, the amount in box 4 should not exceed $9,114 for 2022.

Box 5 will reflect wages subject to Medicare taxes. Medicare taxes generally do not include any pretax deductions. And unlike Social Security wages, there is no cap for Medicare taxes. The figure in box 5 may be larger than the amounts shown in box 1 or box 3.

Box 6 shows the amount of Medicare taxes withheld for the year. Medicare wages are taxed at a flat rate of 1.45%. For most taxpayers, this means that the figure in box 6 equals the number in box 5 times 1.45%. Your employer must also withhold additional Medicare tax of .9% from wages paid to an individual earning more than $200,000, regardless of filing status or wages paid by another employer.

Tips that were reported to your employer will be found in box 7. If this box is blank, it means that you did not report tips to your employer (unreported tips are still taxable).

Allocated tips reported in box 8 are those that your employer has attributed to you and have not been included in boxes 1, 3, 5, or 7. These tips are still considered income to you.

Box 9 is no longer being used since the verification code pilot program has ended.

At box 10, your employer will report the total benefits paid on your behalf under a dependent care assistance program, including those that exceed the $5,000 exclusion (if the value exceeds $5,000, that excess will be reported in boxes 1, 3, and 5). Amounts less than $5,000 paid under a qualified plan are considered nontaxable benefits.

Box 11 will reflect amounts distributed to you from your employer’s nonqualified deferred compensation plan—this amount is taxable. Don’t confuse this with amounts contributed by you. That shows up in box 12.

Box 12 is the kitchen sink of form W-2 reporting. Here, you’ll see all kinds of codes: if there are more than four items to be reported in box 12, your employer may use a separate Form W-2 to report the additional items. Not all of the income coded in box 12 is taxable.

Box 12 Codes

Here’s a quick rundown of some of the most popular codes:

C. Taxable cost of group-term life insurance over $50,000

D—H, S, Y, AA, BB, and EE. Elective deferrals and designated Roth contributions

J. Nontaxable sick pay

L. Substantiated employee business expense reimbursements (nontaxable)

P. Excludable moving expense reimbursements paid directly to a member of the US Armed Forces

R. Employer contributions to an Archer MSA

T. Adoption benefits

V. Income from the exercise of nonstatutory stock options.

W. Employer contributions to your health savings account

Y. Deferrals under a section 409A nonqualified deferred compensation plan

Z. Income under a nonqualified deferred compensation plan that fails to satisfy section 409A

Code DD. The cost of employer-sponsored health coverage or health insurance paid for by your employer. This amount is not taxable to you.

Box 13 isn’t one box, but a series of boxes. Your employer will check the appropriate box if you are a statutory employee, participated in your employer’s retirement plan during the year, or received sick pay under your employer’s third-party insurance policy.

Box 14 is a catch-all box. Your employer reports anything here that doesn’t fit anywhere else. Examples include state disability insurance taxes withheld, union dues, health insurance premiums deducted, and nontaxable income. If you can’t figure out the amounts in this box, check with your payroll or human resources department–in most cases, the IRS will not be able to interpret these for you.

State and Local Tax

Your state and local tax numbers are reported at the bottom of your Form W-2:

Box 15 includes your employer’s state and state tax identification number. If you work in a state without a reporting requirement, this box (along with boxes 16 and 17) will be blank. If you had multiple withholdings in several states, more than one box will be filled. And, with the uptick in remote work, it could be the case that your employer needs to report information for more than two states or localities—in that case, you’ll receive more than one Form W-2 which will share personal identification information but will not show any items that were otherwise included on another Form W-2.

If you are subject to state tax reporting, box 16 will show the total amount of taxable wages for state tax purposes, while box 17 will show the total amount of state income taxes withheld during the year. If you live in a state like Pennsylvania with a flat rate tax, you can double-check to make sure that your withholding is correct by multiplying the amount in box 16 by the flat tax rate.

If you are subject to local, city, or other state income taxes, those wages will be reported in box 18, and your withholding will be noted in box 19. Box 20 will indicate the name of the local, city, or other state tax reported in box 19.

Records

You’ll generally hear tax professionals suggest that you keep Copy C of Form W-2 for at least three years after you file or the due date of your return, whichever is later. However, the IRS instructions recommend that you keep Copy C until you begin receiving Social Security benefits in case there is a question about your earnings in a particular year—that’s a lot of paperwork to file. You can monitor your estimated Social Security benefits as you go by creating a “my Social Security” account online.

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