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The IRS requires all employers to report the wage and salary information for their employees by means of Form W-2. But the W-2 form also reports the amount of state or federal taxes withheld from your paycheck.
The information on the W-2 is extremely important when preparing your tax return especially for an employee. In order to insure you have it in time, the IRS requires the employer to send out the W-2 forms to an employee no later than January 31 (following the close of the tax year, which is usually December 31).
You should only receive a W-2 if you are an employee. However if you happen to be an independent contractor or self-employed, and the work you do could be considered to be the same as an employee, but you will receive the earnings statement on Form 1099 rather than a W-2.
Related: Wage Garnishment
The form is divided into distinct boxes, which report various items that are related to your income. Here is a brief set of instructions on filling out form W-2.
The first box reports the total taxable wages or salary for federal income tax purposes. The figure includes your salary, reported tips, wages, bonuses, and any other taxable compensation. But it also includes taxable fringe benefits (like group term life insurance).
It does not include any pre-tax benefits (like your savings contributions to a 401(k) plan, your health insurance and other such types of pre-tax benefits). The amount form this box is also reported on the 7th line of Form 1040/1040A or on the 1st line of Form 1040EZ. In case you have multiple w-2 forms, add up the amounts from all the box 1 and place the total on the lines mentioned above.
Related: ♦ What is IRS form 1040?
The 2nd box reports the sum total amount withheld from your paycheck for the purpose of federal income taxes. This figure represents the amount paid for federal taxes throughout the year.
This amount is also needed on Line 62 of Form 1040, Line 36 of 1040A (or on Line 7 of 1040EZ). Repeat the procedure mentioned above if you have more than one W-2 form (i.e. add up the box 2 amounts and fill out the total on tax form lines).
The third box reports the sum total of wages subject to the Social Security tax. In 2013, the Social Security tax was assessed on wages up to $113,700. This limit is referred to as the Social Security wage base.
If the amount in Box 3 shows an amount over the wage base, you will need to have your employer correct your W-2. The reported tips to your employer are not included in the 3rd Box. They are however reported in the 7th box.
The 4th box reports the total amount of Social Security taxes withheld in your paychecks. Usually, Social Security tax is at a flat tax rate of about 6.2% on your wage income, up to a maximum wage base of $113,700 (for 2013). Wages above the Social Security wage base are not subject to the Social Security tax. Accordingly, the maximum figure shown in Box 4 should be $7049.40 ($113,700 maximum wage base times 6.2%).
If you have two or more jobs during the year, and your total Social Security wages (box 3) exceeds $113,700, you may have paid-in more Social Security tax than is required. You claim the excess Social Security tax withholding as a refundable credit on your Form 1040.
Box 5 reports the amount of wages subject to the Medicare tax. There is no maximum wage base for Medicare taxes. The amount shown in Box 5 may be larger than the amount shown in Box 1. Medicare wages includes any deferred compensation, 401(k) contributions, or other fringe benefits that are excluded from the federal income tax. In other words, the amount in Box 5 typically represents your entire compensation from your job.
There are a lot more parts to the Complex W-2 form. But the above mentioned aspects are perhaps the most important; therefore you should practice extra care when filling out these bits as well as while filling other tax forms also.
Another common issue people confuse over is how one ought to forward the W-2 form to the IRS. Well, it’s actually quite simple. When you are done with your tax returns and are ready to file them, keep in mind that a copy of your W-2 form MUST always be attached. If you e-file using one of the many tax softwares out there, then your W-2 information will be sent along with the tax return. But if you are filing your tax return by mail then you will have to place a copy right on the front of your return.
Not Received Your Form W-2
If you have not received your Form W-2 by mid-February, then ask your employer if they mailed out the form. You may also ask for another printed copy of your Form W-2 for you to take home.
Sometimes, employers will charge a nominal fee for providing you with an additional copy of your W-2.
If you have not received a Form W-2 from your employer by February 14th, you can contact the IRS for assistance. See Tax Topic 154 on the IRS Web site for more details.
Wrong Information on W-2. How to Correct
I hope you found this information helpful, and I wish you a happy tax year.
Need More Help and Advice – Hire an IRS Tax Attorney