Did you know that the number of people employed in the U.S. grew to 149830 thousand in December 2020? Are you an employee who is trying to understand your W-2?
In this article, explore employee advice for understanding your W-2 form. Read on to uncover all of these tips and tricks so you’ll understand the different parts of this detailed form and how they impact you.
What Is a W-2?
Your W-2 is short for the Wage and Tax Statement. Whether you’re looking for a check stub creator or not, it’s important to understand this document.
At the end of the year, your employer is required to send their employees and the IRS one. It shows any taxes withheld, your annual wages, etc. Your employer deducts taxes from your paychecks and submits them to the government.
What Does It Include?
No matter who your employer is, all W-2’s have the same fields. There are sections divided into federal and state sections.
It’ll also have the company’s EIN (employer identification number). The other fields take a look at your income from the previous year.
The Boxes Explained
The first box is your tips, wages, and other compensation. It includes all money that you made that can be subject to federal income tax.
The second box is about the federal income tax that a company withholds and sends to the IRS. This depends on your withholding allowances, filing status, and taxable wages.
The 3rd box is about your wages that will receive a Social Security tax. It doesn’t include the amount of pre-tax deductions that are exempt from it.
Box 4 is how much your employer withheld from your Social Security tips and wages. Box 5 is how much you earned for Medicare wages and tips.
Box 6 is how much you have withheld from your wages for Medicare. Next is social security tips. This is how much you earned in tips.
Next is allocated tips. This is when an employer allocates any tips for you. Box 9 is a verification code, but this box is now left blank.
Box 10 is dependent care benefits. This is if you receive assistance from the dependent care assistance program.
Box 11 is if your employer has a nonqualified deferred compensation plan. If you receive any bonuses it’ll go in box 11.
Box 12 is about any reductions or compensation from your taxable income. It can include your 401K. Box 13 is about pay that’s not subject to federal income tax withholding.
The next box is where an employer can report any other tax information that might not fit into other sections of the W-2 form. This can include union dues for example.
Boxes 15-20 are about local and state taxes. It shows how much of your pay is subject to these taxes. You can access a copy of the W-2 form on the IRS website.
Employee Advice: Understanding Your W-2
Now that you’ve explored employee advice for understanding your W-2, you should have a better idea of how to read it. Would you like to read more about jobs? Check out our other articles today for career advice and exploring different companies out there.