Know the Basics: Form 1095-C

Breaking Down Your W-2 Form

Posted December 30, 2016 by Jacob Donelly in Running a Business 101
Unlike many tax documents, the W-2 form is rather straightforward. Justworks breaks it down, box by box, to explain what each one means. Learn more.

The most common tax document that employees in the United States receive is the W-2 form. If you have a full-time job and are not just a freelancer, you should receive your W-2 by the end of January.

(Are you a freelancer? We broke down the 1099-MISC here.)

A W-2 tax form is pretty straightforward. It tracks how much you earned, how much you were taxed on, and how much that tax was. You'll find your personal information and your employer's contact information.

Make sure your social security number and address are correct. Discrepancies require the IRS to do more research and the less work they have to do, the better it is for you.

Wages and Withholding

The remainder of the W-2 tax form aims to identify your income for the past business year and how much money was withheld for federal income tax, social security tax, Medicare tax, and applicable state and local taxes.

  • Box 1 – Wages, tips, other compensation: This outlines the total taxable income for the entire year. If you worked less than a year, it'll be from day one. 
  • Box 2 – Federal income tax withheld: This is the amount of money that your employer withheld for federal income taxes.
  • Box 3 – Social security wages: This is the amount of income that is subject to the social security/FICA tax. This is different from income tax because there is a maximum amount that can be taxed with FICA each year.
  • Know your tax forms. Because the sheer number of tax forms for small businesses can feel endless.

    Learn More

  • Box 4 – Social security tax withheld: This is the total amount of social security tax that was withheld. There is a maximum amount because of the cap.
  • Box 5 – Medicare wages and tips: This is the amount of income that can be taxed for medicare. There is no cap on this.

For the most part, people are only going to have to worry about the above five boxes and 16-20. The other boxes are there for people who received other types of income throughout the business year.

  • Box 12a to 12d: These are filled with a letter code so that you know what applies to you. For example, if 12d is filled in, that means money was contributed to your retirement account.
  • Box 13: This is just a check box to let the government know you are a part of a retirement account.
  • Box 14 – Other: If there is any other additional tax information that the government needs, there will be information here.
  • Box 15 – State and Employer’s State ID Number: What state are you earning money in? And what is your employer’s state ID number?
  • Box 16 – State wages, tips, etc: The amount you earned in that particular state. This can be different than where you live.
  • Box 17 – State income tax: This is the amount that you paid in income tax to the state where your job is.
  • Box 18 – Local wages, tips, etc: This is the amount you earned in that specific locality (if that happens).
  • Box 19 – Local income tax: The amount that was taken out of your taxes for local tax purposes.
  • Box 20 – Locality name: What is the location of the job?

Once you have received your W-2 form, you’ll notice that there are three copies unless you also have to pay locality tax. The first copy is meant for your records. The second copy is meant for the Federal Government. The third copy is meant for the State. And if there is a fourth, it should go to your locality.

You'll submit your W-2s with your Form 1040.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.