Form W-2: Wage and Tax Statement Definition

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What Is Form W-2: Wage and Tax Statement?

Form W-2, also known as the Wage and Tax Statement, is the document an employer is required to send to each employee and the Internal Revenue Service (IRS) at the end of the year. A W-2 reports the employee’s annual wages and the amount of taxes withheld from their paychecks. A W-2 employee is someone whose employer deducts taxes from their paychecks and submits this information to the government.1

Key Takeaways

  • Form W-2 reflects the income earned and taxes withheld from the prior year to be reported on your income tax returns.
  • Employers use W-2s to report FICA taxes for employees.
  • The IRS also uses W-2 forms to track individuals’ tax obligations.

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W-2 Form

Who Can File Form W-2: Wage and Tax Statement?

An employer is legally required to send out a W-2 form to every employee to whom they paid a salary, wage, or another form of compensation. This does not include contracted or self-employed workers, who must file taxes with different forms. The employer must send the employee the W-2 form on or before Jan. 31 each year, so that the employee has ample time to file their income taxes before the deadline (which is April 15 in most years).23

Employers must also use W-2 forms to report Federal Insurance Contributions Act (FICA) taxes for their employees throughout the year. By the end of January, employers must file, for the previous year, Form W-2, along with Form W-3, for each employee with the Social Security Administration (SSA). The SSA uses the information on these forms to calculate the Social Security benefits to which each worker is entitled.3

Tax documents are filed for the previous year. For example, if you receive a W-2 form in January 2021 it reflects your income earned for 2020.

What Information Does Form W-2 Include?

Every W-2 has the same fields, no matter the employer. W-2 forms are divided into state and federal sections since employees must file taxes on both levels. Some fields provide the employer’s information, including the company’s Employer Identification Number (EIN) (federal) and the employer’s state ID number. The remaining fields mostly focus on the details of the employee’s income from the previous year.4

In general, you will receive a W-2 from an employer if you earned at least $600 in a given year.

The employee’s total earnings from the employer for the year are included, of course, along with the amount withheld in taxes from the employee’s paychecks, separated into the withholding for federal income tax, Social Security tax, and more. If the employee also works for tips, a field shows how much money in tips the employee earned for the year.4

When the employee files taxes, the amount of tax withheld according to the W-2 form is deducted from their gross tax obligation. If more tax was withheld than the employee owes, they may receive a refund. The IRS also uses Form W-2 to track an employee’s income and tax liability. If the income reported on an employee’s taxes doesn’t match the income reported on the Form W-2, the IRS may audit the taxpayer. However, taxpayers are required to report all salary, wage, and tip income, even if that income is not reported on a W-2.

How to Read Form W-2: Wage and Tax Statement

W-2 forms include both numbered and lettered boxes that an employer must fill out and reflects how much you earned and taxes withheld.

Form W-2 (2021)
Form W-2 (2021).

Boxes A through F

The lettered boxes on a W-2 include the name and address of you and your employer, your Social Security number, and your employer’s EIN and state ID number.4

Boxes 1 and 2

Box 1 shows your taxable income, including wages, salary, tips, and bonuses, while Box 2 shows how much federal income tax your employer withheld from your pay.3

Boxes 3 and 4

Box 3 details how much of your earnings were subject to Social Security tax and Box 4 the amount of Social Security tax that was withheld.3

Boxes 5 and 6

Box 5 spells out how much of your pay is subject to Medicare tax and Box 6 how much was withheld.3 The employee portion of the Medicare tax is 1.45%.5

Boxes 7 and 8

If part of your pay is in the form of tips, these boxes show how much you reported in tips (Box 7) and how much your employer reported in tips it paid to you (Box 8).3

Box 9

This box was used to reflect a now-defunct tax perk, so it is left empty.4

Box 10

Box 10 reports how much you received from your employer in dependent care benefits (if applicable).3

Box 11

This box details how much deferred compensation an employee received from their employer in a non-qualified plan.3

Box 12

Box 12 details other types of compensation or reductions from your taxable income and a single or double letter code that corresponds to each. It might include, for example, contributions to a 401(k) plan. Codes are detailed in the IRS’ W-2 instructions.3

Box 13

This box has three sub boxes designed to report pay that is not subject to federal income tax withholding, if you participated in an employer-sponsored retirement plan or if you received sick pay via a third-party, such as an insurance policy.3

Box 14

Box 14 allows an employer to report any other additional tax information that may not fit into the other sections of a W-2 form. A few examples are state disability insurance taxes withheld and union dues.3

Boxes 15-20

The last six boxes on a W-2 all relate to state and local taxes, including how much of your pay is subject to these taxes and how much was withheld.3

All copies of Form W-2 are available on the IRS website.6

Other Relevant Forms

Form W-4 is a form that individuals complete for withholding purposes; the employer uses its information to determine how much tax to withhold from the employees’ paychecks.7 Contracted employees must fill out Form W-9 when they start working for a company. If they complete $600 worth’s of work or more for the company in a year, the company issues a 1099 form showing the earnings and deductions made.8

Students receive a 1098-E statement for any year in which they paid interest on a federal student loan. Students also receive a 1098-T statement reporting college tuition expenses that might entitle students to tax deductions or credits.9

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