Form W-2 is a wage and tax statement issued to an employee from their employer. This form contains information such as the employee’s gross income, their local, state, and federal tax withholdings, social security withholding, and more. If an employee is paid at least $600 by an employer throughout the tax year, they will be issued a W-2.
Along the bottom of Form W-2 is the employee’s state of employment, their employer’s ID number, their state wages, and tips, as well as state and local income taxes. Form W-2 also has boxes for different types of withholdings and taxes. Let's take a look at what is in each box.
A Breakdown of Each Box
Each box on Form W-2 has a different meaning. When reviewing their W-2, an employee should first verify that boxes a,e, and f are correct. These boxes hold their social security number, name, and address, respectively.
Box 1 - This box represents total taxable wages, including all tips and other compensation.
Box 2 - This represents the amount of federal income tax withheld from each paycheck throughout the tax year. Employees can make adjustments to this number by changing the exemptions on their Form W-4.
Box 3 - This box shows all wages subject to social security tax. This is before any payroll deductions, meaning this amount could end up being more than the amount in box 1.
Box 4 - The amount in box 4 shows the social security taxes withheld from each paycheck throughout the year.
Box 5 - Employees will find all wages subject to Medicare taxes in box 5. This amount may not be the same as the amount in Box 1.
Box 6 - This is the amount of Medicare taxes withheld from each paycheck throughout the year. Like the social security tax, medicare tax is a flat rate, at 1.45%. This means you can take box 5 and multiply it by .0145 (1.45%), and it will reflect the amount shown in box 6.
Boxes 7 - This box shows any tip income you reported to your employer.
Boxes 8 - This box shows the amount of tip income allocated to you by your employer and does not display in boxes 1, 3, 5, or 7.
Box 9 - This box will be blank or not show up, as the reporting requirement has expired.
Box 10 - This box shows the total amount of benefits paid for on behalf of the employee under a dependent care assistance program. If this amount is under $5000, it is not taxable.
Box 11 - This amount shows how much has been distributed to the employee from their employer’s nonqualified deferred compensation plan. This amount is taxable.
Box 12 - This box contains a code that reflects different types of compensation or benefits. To see a breakdown of the codes and what each code stands for, refer to the IRS guidance for Form W-2 (scroll to page 30 in the PDF).
Box 13 - This is a compilation of three boxes and will display three items: Statutory Employee, Retirement Plan, and Third-Party Sick Pay. Employers will check the box(es) that applies to the employee’s situation.
Box 14 - Otherwise known as the “it didn’t fit anywhere else” box, box 14 can hold many different things such as unions dues, non-taxable income, and so on.
With payroll software, reporting and auditing Form W-2 is a breeze! Let us know if you'd like a demo of how Dominion can streamline W-2s and your Year-End processes for your company.
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