The Joys of Forms, Taxes, and the IRS

Like it or not, you pay taxes. There’s an old quote that says you can only count on “death and taxes”. The US government and more specifically, the IRS, needs their slice of the pie anytime you make or spend money. Today we’re going to understand one of the most common tax forms the average American handles every year. The W-2.

What is the W-2 Tax Form?

The W-2 tax form is a document provided to employees from their employers showing wages that were paid and taxes that were withheld. The form is broken down in sections and boxes depicting total earned income, state and federal taxes withheld, benefits earned, and specific tax-program withholdings like Medicare and Social Security.

Employees will use this form when preparing their state and federal tax returns. The information from this form will help determine whether or not you will receive a tax refund or pay a tax bill at tax time. The W-2 is a “year in review” for an employee’s tax related income information.

How to Read a W-2 Tax Form

• Box 1: The amount you were paid in wages, tips, and other compensation

• Box 2: The amount of federal income tax withheld by your employer

• Box 3: The amount of your income that was subject to Social Security Taxes

• Box 4: The amount of taxes taken from your income for Social Security

• Box 5: The amount of income subject to Medicare tax

• Box 6: The amount of Medicare tax withheld from your income

• Box 7: The amount of tip compensation you earned that is subject to Social Security Tax

• Box 8: The amount of tip money your employer reported you earned

• Box 10: The amount of dependent care benefits your employer paid you or incurred on your behalf

• Box 12: 12a-12d are boxes where the employer can provide more detail about specific compensation like 401K plans

• Box 13: Indicates if your earnings are subject to Social Security & Medicare but not Federal taxes for retirement plans or other special compensation from the employer.

• Box 15: The State you are paying state taxes to

• Boxes 16-19: The amount of your income subject to your state’s income taxes and local income taxes.

When Do We Get a W-2 Tax Form?

The federal government requires all employers to send out their employee’s W-2 forms by Jan 31st. Employees should receive their W-2 by the first week of February at the latest.

A W-2 tax form is typically given to any employee of a company who received at least $600 of income in a given tax year. Additionally, if social security, income, or Medicare taxes were withheld from an employer, the employee will receive the form for their personal tax reporting purposes.

Remember a W-2 is for employees of a company/employer. If you were a contracted worker for a certain period of time, you would likely receive a 1099 tax form instead of a W-2 tax form.

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