Understanding a W-2 tax form is essential for accurately reporting your income and filing your taxes. The W-2 form is provided by your employer and summarizes the income you earned and the taxes withheld during the tax year. Here's a breakdown to help you read and understand a W-2 form.
Read more about the IRS's instructions for the Form W-2 on the IRS website, here.
Identify the Sections:
The W-2 form is divided into several boxes and sections. Each box contains specific information. The sections are labeled with letters from Box A to Box H.
Personal Information (Boxes A-F):
Boxes A through F contain your personal information and your employer's information. Ensure that your legal name, address, and Social Security Number (SSN) are correct. Also, verify your employer's information in Box B.
- Corrections to the legal name & SSN on a W-2 may be submitted by your payroll admin to receive a W-2 Correction (W-2C)
- If your address is incorrect, no W-2C is required. However, ensure you update your address in Homebase so that future forms include your accurate information.
Wages and Compensation (Boxes 1-2):
Box 1 shows your total taxable wages, salary, and tips. This is the amount you'll use to report your income on your federal tax return.
- Taxable wages may differ from your total gross pay on paystubs if you had pre-tax deductions on payroll throughout the year.
Box 2 shows the federal income tax withheld from your paycheck throughout the year.
- This amount is determined by your Federal W-4. If you'd like to update your W-4 moving forward, you can do so from your Homebase mobile app, or a web browser at joinhomebase.com. Read more about Federal Income Tax calculation in our Help Center, here!
Social Security and Medicare Taxes (Boxes 3-6):
Box 3 shows your total wages subject to Social Security tax. If applicable, tipped wages subject to social security tax are displayed in Box 7.
Box 4 displays the amount of Social Security tax withheld. If applicable, tipped wages subject to social security tax are displayed in Box 8.
Box 5 shows your total wages subject to Medicare tax.
Box 6 displays the amount of Medicare tax withheld.
State and Local Taxes (Boxes 15-20):
Boxes 15-17 contain information on state and local income tax.
Boxes 18-20 show any state and local income tax withheld.
Other Deductions and Contributions (Boxes 10-14):
Box 10 may include dependent care benefits, and Box 12 may include codes for various items like retirement plan contributions, health insurance premiums, or other special situations.
Miscellaneous Forms of Compensation (Box 12):
Box 12 reports various information from your payroll records including company sponsored benefits plans and retirement deferrals. Each Box 12 line item is accompanied by a code (AA in the example above) which indicates what it represents.
Common box 12 codes:
- D - Elective deferrals under a section 401(k)
E - Elective deferrals under a section 403(b)
- AA - Designated Roth contributions under a section 401(k) plan
- BB - Designated Roth contributions under a section 403(b) plan
- DD - Cost of employer-sponsored health coverage
An expanded list of codes in Box 12 on a W-2 can be found in our Help Center, here.
Retirement Plan Contributions (Box 13):
Box 13 will indicate if you participated in a retirement plan, such as a 401(k). This information may affect your eligibility for certain tax benefits.
Explanatory Codes (Box 14):
Box 14 may include additional information or codes related to specific items, such as educational assistance, union dues, or after-tax contributions.
Make sure to verify that the totals in Boxes 1, 2, 3, 4, 5, and 6 match your records.
Understand Taxable Benefits:
Be aware of any taxable fringe benefits or other compensation included in your W-2. These may be reported in different boxes or sections. These increase your taxable wages and may appear on your paystub as "imputed earnings."
Compare with Your Pay Stubs:
Cross-reference the information on your W-2 with your final pay stub for the year. Remember that total gross wages on your paystubs may differ from your Box 1, 3, 5, 16, and 18 wages due to pre-tax benefit deductions that occurred on payroll.
Year to date tax totals on your final paystub should match Boxes 2, 4, 6, 17, and 19.
Year to date benefit totals on your final paystub should match those recorded in boxes 10, 12, and 14.
Disclaimer: If you have questions or are unsure about any information on your W-2, it's advisable to consult with a tax professional or the IRS. They can provide guidance and clarification based on your specific situation.