Understanding Your W-2

Your W-2 is a statement of your wages and withholdings sent to you from your employer. You will need this form in order to fill out your tax return, but it’s important to understand all of the information contained within.

Box 1- the total of your wages, tips, bonuses, prizes, and compensatory benefits. The first box doesn’t indicate are elective deferrals for retirement funds, payroll deductions, or benefits taken prior to taxation.

Box 2 – amount of federal tax withholdings for the year.

Box 3 – reports the amount of income subject to Social Security taxation. This is taxed prior to any deductions, which means the amount can be more than what is stated in box 1. In the case of a high wage earner, box 3 may report lower than the total of box 1, as it can’t exceed the Social Security wage base, which is $118,500 for 2015.

Box 4 –this is the actual amount of taxes withheld for Social Security taxes, subject to a rate of 6.2%. This should be the number listed in box 3 multiplied by 6.2

Box 5 – lists the amount of income subject to taxation under Medicare. Typically, these taxes aren’t inclusive of pretax deductions, and will include most benefits eligible to be taxed. There is no maximum cap, which means this box can list amounts higher than either Box 3 or 4.

Box 6 – indicates the amount of Medicare taxes withheld. Like box 3 and 4, this is simply the amount listed in box 5 multiplied by the flat Medicare tax rate of 1.45%.

Box 10 – If you received any benefits for dependent care assistance, that amount is listed in this box. Amounts under $5,000 are non-taxable benefits. This box reports the total value of all dependent care benefits, even if it is higher than $5,000. The excess of the $5,000 will be represented in the figures of boxes 1, 3, and 5.

Box 11 – any amount you received as a distribution from your employer as part of a non-qualified deferred compensation plan is taxable, and reported in box 11. This is separate from contributions you have made which will be evident in Box 12.

Box 12- There are a variety of codes found in Box 12, though it doesn’t mean you will be taxed on the reported amounts. The most common codes are:

  • Code D – elective deferrals. Often these amounts are included in the total reported in boxes 3 and 5, even if they aren’t reported in the first box.
  • Code DD – employer sponsored health coverage costs. You’re not responsible for taxes on it, but is reported as part of the compliance of the Affordable Care Act.

Box 13 – Whichever box is appropriate will be checked by your employer. This is really three different boxes combined into one.

  • You are a statutory employee subject to Social Security and Medicare taxation but not Federal taxes
  • You participated in your employer’s retirement plan
  • You received sick pay via a third party insurance of your employer

Box 14 –this is the place where your employed can report items such as disability insurance taxes, union dues, nontaxable income and health premiums, as they don’t have their own specific box for reporting.

Box 15 – lists your employer’s state and state tax identification number. If your state doesn’t require reporting of state taxes, boxes 15, 16 and 17 will not have numbers in them, and this is done so on purpose. If you worked in multiple states, your withholdings will fill more boxes.

Box 16 – lists the amount of your income which must be taxed by your state.

Box 17 – state tax withholdings are indicated in this box. If your state taxes at a standard rate, you can simply multiply the amount listed in Box 16 by the flat rate.

Box 18 – additional taxes that may apply to you will be stated here. For example, city or locality taxes. You will receive an additional Form W-2 if you have had withholdings in more than two localities or states.

Box 19 – lists withholdings for local, city or excess state taxes.

Box 20 – explains which tax the amount in Box 19 is being withheld in accordance with.