W2 Boxes Explained: How Does a W2 Work?

Every year just after the New Years’ resolutions and holiday pack up, most employees get a sealed envelope delivered to them from their human resources department.

It universally reminds Americans tax season is just around the corner. For most people, they take the form, stuff it in their bag or briefcase and don’t think about it again until they get their taxes done.

Have you ever taken the time to study your W2? There are a whole bunch of boxes each representing something important to the IRS and your taxes and income.

Read on to get your W2 boxes explained.

What is a W2?

Officially known as a Wage and Tax Statement, the W2 form is required of employers. They must provide a copy to both you and the IRS.

The W2 form gives you information about wages and deductions like taxes.

Understanding The Boxes on the W2

Employers must provide this to employees at the end of each calendar year. Many employers use an online system where employees can obtain salary and tax information throughout the year.

Employees can get W2 online forms by accessing their employee portal. Many employers also use an online system for creating those W2 forms.

Lettered Boxes

There are both lettered and numbered boxes found on the W2 form. Let’s start with the lettered boxes found on the left side of the W2 form.

Box A

Box A shows the employee’s social security number. It is critical this number be accurate, as it’s how the IRS identifies you. Not having the social security number accurate could delay your tax refund.

Box B

Box B is related to your employer. It is their Employer Identification Number or EIN. This is like the employer version of the social security number.

The EIN is assigned to the employer by the IRS so they can report and pay in taxes.

Box C

Box C gives the employer’s address as it is known to the IRS. Note, this may not be the site where you work. It is likely the employer’s corporate offices or where the human resources office is located.

Box D

Don’t be alarmed if you Box D is blank. This box has your employer’s payroll ID number if they use one. Not all employers use one.

Box E

Box E should have your full legal name. The name listed in Box E should match how it is listed on your social security card.

Box F

This box is your legal address. Both Box E and F are also important to be accurate. Like the social security number, it’s how the IRS connects to you.

Numbered Boxes

The numbered boxes show taxes and deductions. Let’s take a closer look.

Box 1

Box 1 is usually the box you look to when you first open the W2. It shows your income that is taxable.

This income will include salary, bonuses, and tips.

Box 2

Box 2 is often the box that is most depressing for wage earners. It shows the total deductions taken from the total amount earned.

Box 3

In Box 3 you should see how much social security was paid from the Box 1 amount. This is paid towards social security that you hope to collect from in your elder years.

Box 4

Box 4 shows how much social security tax you actually paid.

Social security tax is figured based on a flat rate which this year is 6.2%.

Box 5

This box shows the tips and wages that are taxed for Medicaid and Medicare.

Box 6

The Medicaid taxes are paid based on a flat amount, just like the social security tax. This amount is 1.45% of wages and tips.

The number here shows how much you paid towards this Medicaid tax.

Box 7

If you work in the service industry, this box applies to you. This box shows the total dollar amount of tips you reported.

Box 8

For many, this box will again be blank. If you work in the service industry, this box may apply to you. This is for allocated tips that your employer reports to the IRS.

Your employer would report this if you were not reporting enough on your own.

Box 9

Guess what? Box 9 is blank, for everyone. It used to be a required reporting number and it’s no longer needed. Box 9 is actually in process of being removed from all W2 forms.

Box 10

Box 10 involves benefits paid for dependent care. If you pay money from your wages for benefit assistance, this amount is shown here too.

Box 11

If your employer pays you money from a deferred compensation plan, the amount is shown in Box 11.

Box 12

Box 12 shows information about money paid from Box 1, which is your total income. The best example is if you pay into your company’s 401k plan.

Box 13

This box correlates income you might have received that you don’t need to pay federal income taxes on. You might pay social security and Medicare tax but not pay federal income tax on some types of earnings.

Box 14

If it couldn’t fit anywhere else, your employer can use this box. It might be used for disability or union dues, for example.

Boxes 15 to 20

These boxes are set aside for state and local taxes. It will show how much income is needed to be paid to your state or local municipality. It also shows how much you actually paid.

Not Getting a W2

Is there a reason you might not get a W2 form? If you are a freelancer, you are required to report your own taxes using the 1099 form. Independent contractors also use 1099 forms instead of W2 forms.

W2 Boxes Explained So You are Ready for Tax Season

The W2 form might seem daunting at first glance. There are so many boxes and numbers, it can be overwhelming if you aren’t a tax accountant.

With the W2 boxes explained it should be less confusing. Certainly, you want to know what all those boxes mean since it relates to your money.

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