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Frequently Asked Questions

What is a W-2 form?

Form W-2 (Wage and Tax Statement) reports an employee's annual wages and the taxes withheld by their employer. Box 1 shows taxable wages, Box 2 federal income tax withheld, Box 3 Social Security wages, Box 4 SS tax withheld, Box 5 Medicare wages, Box 6 Medicare tax withheld, and Boxes 12-14 various codes.

How is W-2 income taxed?

W-2 income is taxed through withholding. Your employer deducts federal income tax (based on your W-4), Social Security tax (6.2% up to $168,600 for 2024), and Medicare tax (1.45% on all wages). State and local taxes may also be withheld. You reconcile at filing.

What is the difference between Box 1 and Box 3 wages?

Box 1 (federal taxable wages) includes all taxable compensation minus pre-tax deductions (401k, HSA, health insurance premiums). Box 3 (Social Security wages) includes all wages subject to SS tax up to the wage base ($168,600 for 2024). Box 5 (Medicare wages) includes all wages with no cap.

How do I calculate my tax refund from my W-2?

Your refund = total withholding (Box 2 + Box 4 + Box 6 + state withholding) - total tax liability. If withholding exceeds your tax, you get a refund. If withholding is less, you owe. The average refund for 2023 was approximately $3,100.

What do W-2 codes mean?

Common Box 12 codes: D (401k contributions), E (403b contributions), G (457b contributions), C (group-term life insurance over $50,000), DD (cost of employer health coverage), W (HSA contributions), BB (designated Roth 401k contributions). Box 14 codes are employer-specific.

How do pre-tax deductions affect my W-2?

Pre-tax deductions (401k, HSA, health insurance, FSA) reduce Box 1 (federal taxable wages) but may not reduce Box 3 and Box 5 (which are before pre-tax deductions). This means your FICA tax is based on pre-deduction wages even though income tax is based on post-deduction wages.

What is the difference between a W-2 employee and a 1099 contractor?

W-2 employees have taxes withheld by employers, receive half of FICA paid by employer, get benefits (PTO, health insurance, 401k match), and are covered by employment laws (minimum wage, overtime, workers comp). 1099 contractors pay both halves of FICA and receive no benefits.

How are bonuses reported on a W-2?

Bonuses are included in Box 1, Box 3 (up to SS wage base), and Box 5 wages. Federal tax withheld on bonuses uses the supplemental wage rate (22% for bonuses under $1M, 37% over $1M) or aggregate method. The bonus withholding is included in Box 2.

How are stock options reported on a W-2?

NSO bargain element at exercise is reported as wages in Box 1, Box 3, and Box 5. ISO disposition (disqualifying) is reported in Box 1. RSUs at vesting are included in Box 1. ESPP disposition of shares is reported in Box 1 for the discount amount.

What is the Social Security wage base on W-2?

For 2024, the Social Security wage base is $168,600. Wages above this amount are not subject to Social Security tax (6.2%). Box 3 (SS wages) will not exceed this limit. Box 4 (SS tax withheld) will stop once 6.2% � $168,600 = $10,453.20 is reached.

What is Box 12 code DD?

Box 12 code DD reports the cost of employer-sponsored health coverage. This is for informational purposes only - it is not taxable income. The amount reflects the total premium paid by the employer, including medical, dental, and vision coverage. The ACA requires this reporting.

How are tip income reported on a W-2?

Tips over $20 per month are reportable and included in Box 1, Box 3 (up to SS base), and Box 5. Allocated tips (if your employer allocates tip income) are shown in Box 8. Tip income is subject to income tax and FICA, the same as regular wages.

What is the difference between Box 1 and Box 16?

Box 1 is federal taxable wages. Box 16 is state taxable wages, which may differ from Box 1 because some states have different pre-tax deductions or income definitions. For example, HSA contributions may be pre-tax federally but post-tax in some states.

How do moving expenses affect a W-2?

For most employees, employer-paid moving expenses are included in Box 1 as taxable wages (the moving expense deduction was suspended for 2018-2025 except for active-duty military moving under orders). Previously, qualified moving expenses were excluded from Box 1.

What is Box 14 on a W-2?

Box 14 is for employer-reported miscellaneous information. Common entries: state disability insurance (SDI) tax, union dues, educational assistance, dependent care benefits, health insurance premiums deducted, and other employer-specific amounts. The treatment varies - some are tax items, others informational.

How do I correct a W-2 error?

If your W-2 has incorrect wages or withholding, ask your employer to issue a corrected W-2C (Form W-2C). If the employer refuses or is unable, file Form 4852 (Substitute for Form W-2) with an explanation. The IRS may help obtain the correction or accept the substitute.

What is the deadline for employers to issue W-2s?

Employers must provide W-2 forms to employees by January 31 of the following year. The deadline for filing with the SSA is also January 31 (for both paper and electronic filing). Late filing can result in penalties of $60-$310 per form depending on lateness.

How do multi-state W-2s work?

If you worked in multiple states, the employer may issue one W-2 with multiple state entries (Box 16-20). Each state has its own wages, withholding, and employer ID. You must file a nonresident or part-year return for each state where you worked and received income.

What is Box 12 code W?

Box 12 code W reports employer HSA contributions. These contributions are excluded from Box 1 (federal taxable wages) but included in Box 3 (Social Security wages) and Box 5 (Medicare wages). Total HSA contributions (employer + employee) must not exceed the annual limit ($4,150 individual, $8,300 family for 2024).

How is severance pay reported on a W-2?

Severance pay is taxable wages and is included in Box 1, Box 3 (up to SS base), and Box 5. Federal income tax is withheld using the supplemental wage rate (22%). If you receive severance while also receiving regular wages, withholding depends on whether they are paid together or separately.

What is Box 12 code C?

Box 12 code C reports the taxable cost of group-term life insurance over $50,000. The imputed income is calculated using IRS Table I rates based on age. This amount is included in Box 1, Box 3 (up to SS base), and Box 5 as additional wage income.

How do retirement plan contributions show on a W-2?

Pre-tax 401(k)/403(b)/457(b) contributions are shown in Box 12 with code D/E/F/G. Roth contributions are code AA/BB/EE. Employer matching contributions are not reported on your W-2. The total of your elective deferrals is also included in Box 12 with code D.

What is the penalty for not filing a W-2?

Employers who fail to file correct W-2s face penalties: $60 per form (up to $630,000/year) for late filing, $120 per form (up to $1,890,000) for intentional disregard. Employees need the W-2 to file taxes. If you don't receive your W-2, contact your employer or the IRS after February 14.

How do I verify my W-2 information?

Compare your last pay stub of the year to your W-2. Check: Box 1 = year-to-date taxable wages, Box 2 = year-to-date federal tax withheld, Box 3 = year-to-date SS wages, Box 4 = year-to-date SS tax. Discrepancies may indicate employer errors that need a W-2C.

What is the Earned Income Tax Credit and the W-2?

The EITC is a refundable credit for low-to-moderate income workers. Your W-2 Box 1 wages are used to calculate the credit. For 2024, the maximum credit ranges from $632 (no children) to $7,830 (3+ children). The credit phases out based on AGI.

How do dependent care benefits show on a W-2?

Dependent care benefits (FSA or employer-provided) up to $5,000 ($2,500 if married filing separately) are shown in Box 10 of your W-2. Amounts above the exclusion are included in Box 1. The excluded amount reduces your dependent care credit eligibility.

What is Box 12 code Z?

Box 12 code Z generally indicates income from the receipt of qualified equity grants under IRC Section 83(i) - deferred stock income. This is less common but used for certain startup employee stock programs where taxation of stock is delayed.

How does the Additional Medicare Tax appear on a W-2?

The Additional Medicare Tax (0.9% on wages over $200,000) is reported in Box 6 of Form W-2 along with regular Medicare tax. Box 5 shows total Medicare wages including the excess. The employer begins withholding the additional tax once Box 5 wages exceed $200,000.

What is the difference between Box 2 and Box 4?

Box 2 (federal income tax withheld) is based on your W-4 and filing status - it is income tax. Box 4 (Social Security tax withheld) is 6.2% of Box 3 wages up to $168,600. Box 2 can vary based on allowances, while Box 4 is a fixed percentage up to the wage base.

Can I file my taxes without a W-2?

If you haven't received your W-2 by February 14, contact your employer. After February 14, call the IRS at 800-829-1040 for assistance. You can file Form 4852 (substitute W-2) to estimate your wages and withholding, or file an extension (4868) to get more time.