Part of the “W series” of tax forms, IRS Form W-2 is a six-part federal Wage and Tax Statement. It reports the wages earned by employees and the taxes that were withheld from their paychecks. It also reports Social Security tax, a.k.a. the Federal Insurance Contributions Act (FICA) tax, to the Social Security Administration. The FICA tax has two components ― the Social Security portion and the Medicare portion ― which are separately reported on Tax Form W-2.
Tax Form W-2 is the responsibility of the employer. Employers are required to complete a W-2 Form for each of their employees, and they must deliver it to each employee by January 31st of the calendar year. Employers must then file the W-2 Forms with the Social Security Administration by the last day of February (if filing by paper mail) or the last day of March (if filing electronically). W-2 Tax Forms will report all the wages and taxes of the employees of that business/company for the prior calendar year.
The following information provides a line-by-line analysis for each component of IRS Tax Form W-2, based on the 2009 IRS Instruction Booklet.
Tax Form W-2 has 6 copies/parts:
- Copy A: This copy must be submitted to the Social Security Administration by the employer, either electronically or by mail.
- Copy B: This copy is given to the employee to file with their federal income tax return (e.g., Forms 1040, 1040A, or 1040EZ).
- Copy C: This copy is given to the employee to keep for their records (to be safe, this copy should be kept for at least four years)
- Copy D: This copy is kept by the employer, for their records.
- Copy 1: This copy is submitted by the employer to the employee’s state, city, or local tax department (if any).
- Copy 2: This copy is given to the employee to file with their state or local income tax returns (if any).
Tax Form W-2 has 6 lettered boxes (A thru F) that cover employer and employee identification information:
- Box A: Employee’s social security number ― As it appears on their social security card.
- Box B: Employer identification number (EIN) ― The number assigned by the IRS, that was used on the employer’s federal employment tax return.
- Box C: Employer’s name, address, and ZIP code ― As it appears on the employer’s federal employment tax return.
- Box D: Control number ― Optional; A code number assigned by the company’s payroll processing software to identify individual W-2s.
- Box E: Employee’s name ― As it appears on their social security card.
- Box F: Employee’s address and ZIP code ― May be a former address if the employee recently moved.
Tax Form W-2 has 20 numbered boxes (1 thru 20) that cover wages and taxes:
Box 1: Wages, tips, other compensation ― This box must show the total taxable wages, tips, and other compensation (e.g., bonuses and group-term life insurance benefits) that the employee was paid during the year, before any payroll deductions.
Box 2: Federal income tax withheld ― This box reports the total federal income tax that was withheld from the employee’s paychecks during the year. (Note: The employer should not reduce wages by any advance Earned Income Tax Credit (EITC) payments that were made to the employee.)
Box 3: Social security wages ― This box reports the total amount of wages subject to employee Social Security tax, not including Social Security tips (Box 7) and allocated tips (Box 8). The number reported in this box cannot exceed the maximum taxable amount of $106,800. Box 3 should also include: signing bonuses, the taxable cost of group-term life insurance over $50,000 (also included in Box 1), adoption benefits, employee contributions to a SIMPLE retirement account, employee and nonexcludable employer contributions to an MSA or HSA (that were not made through a cafeteria plan), and the cost of accident and health insurance premiums for 2% or more shareholder-employees paid by an S corporation (if not excludable).
Box 4: Social security tax withheld ― This box reports the total amount of Social Security tax that was withheld from the employee’s paychecks during the year, including Social Security tax on tips. (Note: This amount should not be reduced by any advance EIC payments that were made to the employee.) The Social Security tax has a flat rate of 6.2% of wages, up to a maximum taxable amount of $106,800. Therefore, the tax should not exceed $6,621.60 for any individual (6.2% × $106,800 = $6,621.60).
Box 5: Medicare wages and tips ― This box reports the total amount of wages and tips subject to employee Medicare tax, which has a flat rate of 1.45% on all earnings. This box may also include 401k contributions, deferred compensation, and other benefits. There is no maximum limit for wages subject to Medicare tax, so it is not uncommon for the amount in Box 5 to be greater than the amount in Box 1 or Box 3.
Box 6: Medicare tax withheld ― This box reports the total amount of Medicare tax that was withheld from the employee’s paychecks during the year. The Medicare tax has a flat rate of 1.45% on all earnings. (Note: This amount should not be reduced by any advance EIC payments that were made to the employee.)
Box 7: Social security tips ― This box shows the amount of tip income that the employee reported to the employer. If no tips were reported, this box will have no amount. (Note: These tips should be included in Boxes 1 and 5. And the total of Boxes 3 and 7 should not exceed $106,800.)
Box 8: Allocated tips ― This box allows the employer to report any additional tip income that was not reported by the employee in Box 7, if the tips from Box 7 are below the required percentage/amount. The amount shown in Box 8 should not be included in Boxes 1, 3, 5, or 7. If an employee has allocated tips shown on their W-2, they must report those tips using Form 1040 – they cannot use Forms 1040A or 1040EZ.
Box 9: Advance EIC payment ― This box reports the total amount of advance EIC payments received by the employee and paid by the employer. This will only apply to employees who filed Form W-5 (Earned Income Credit Advance Payment Certificate), and these advance payments will be repaid on the employee’s 1040 or 1040A.
Box 10: Dependent care benefits ― This box reports the total amount of dependent care expenses/services (e.g., daycare facilities) that was paid for or provided by the employer during the year, through a dependent care assistance program. Although up to $5,000 of received benefits may be excluded from an employee’s income, the total amount of benefits paid by the employer must be reported in Box 10, whether or not it exceeds $5,000. Any amounts over $5,000 must also be included in Boxes 1, 3, and 5 (within the applicable limitations).
Box 11: Nonqualified plans ― This box reports any amounts distributed to the employee from the employer’s nonqualified deferred compensation plan or nongovernmental pension plan. This amount should be included in Box 1 as part of the employee’s taxable income. Box 11 helps determine if any part of the amounts reported in Boxes 1, 3, or 5 are from a previous year.
Box 12 (a, b, c, d): Codes ― This box reports deferrals, contributions, and uncollected taxes with a single or double letter code (from A to BB), followed by a dollar amount. Code letters do not have to correlate with the Box 12 letters (a, b, c, or d), and no more than four items can be reported in Box 12 of Copy A. To report additional items on Copy A, use a separate W-2.
Box 13: Checkboxes ― This section offers three checkboxes: Statutory employee, Retirement plan, and Third-party sick pay. Any of those that apply to the employee must be checked-off.
Box 14: Other ― This box allows the employer to report any additional tax information, including the value of a vehicle leased to the employee, union dues, employer-paid health insurance premiums and tuition assistance, and certain contributions to a pension plan.
Box 15: State and Employer’s state ID number ― This box shows the employer’s state (as a two-letter abbreviation) and the employer’s state identification number (assigned to them by the state). This box can be used for two states, separated by the broken line.
Box 16: State wages, tips, etc. ― This box reports the total amount of taxable income the employee earned in that state. This box can be used to report wages from two states, separated by the broken line.
Box 17: State income tax ― This box reports the total amount of state income tax that was withheld from the employee’s wages (from Box 16). This box can be used to report taxes for two states, separated by the broken line.
Box 18: Local wages, tips, etc. ― This box reports the employee’s total amount of taxable income that is subject to local, city, or other state income taxes. This box can be used to report wages from two localities, separated by the broken line.
Box 19: Local income tax ― This box reports the total amount of local, city, or other state taxes that was withheld from the employee’s wages (from Box 18). This box can be used to report taxes for two localities, separated by the broken line.
Box 20: Locality name ― This box identifies the locality for which the taxes were withheld.