Taxable compensation and benefits received from your employer, as well as the Social Security, Medicare and income taxes withheld are reported each year on Form W-2. Your employer is required to provide or send Form W-2 to you no later than January 31st. You should be sure that your employer has your correct mailing address, and if you do not receive Form W-2, you should contact your employer. And, if you work for more than one employer during the year, you should be sure you get a W-2 from each employer.

Form W-2 shows the employer’s name, address, and taxpayer identification number, and your name, address and social security number. The information contained on Form W-2 is the information employers are required to provide to the Internal Revenue Service (IRS). Understanding the information reported on your W-2 will help you complete your tax return correctly.

The following is a description of what the different boxes shown on Form W-2 are used for, and where the corresponding amounts should be reported on your tax return.

Form W-2

Box 1: Wages, salaries, tips and other compensation you receive from your employer for your services. This amount should be reported on the "Wages, salaries, tips, etc. " line of your Form 1040 or 1040A, or on the corresponding line if you are filing Form 1040EZ.

Box 2: Federal income tax withheld. This should be reported on the federal income tax withholding line of your tax return. Even if you are not required to file a return, but federal income tax has been withheld, you should file a return to claim the Earned Income Credit and to obtain a refund of federal income tax withheld that is more than your tax liability. If, once you have completed your income tax return, you find that the amount withheld was either excessive or insufficient, you may need to ask your employer to revise your W-4 tax withholding form.

Box 3: Social security wages - the amount of your compensation subject to social security tax. Employees pay a certain percentage for social security tax (Old Age, Survivors and Disability Insurance, or "OASDI") on their earnings up to a maximum amount per year. This ceiling amount is subject to change and is published by the IRS and other government entities each year. If your total compensation is less than the maximum amount on which social security tax applies, this will be the same amount as in box 1. If you earned more than the maximum amount subject to Social Security tax, this box will show the maximum amount.

Note: If you had more than one employer during the year, you should check the combined totals of your W-2’s to see if you paid more than the required amount of social security tax; that is, whether your total income for the year went over the maximum amount subject to social security tax. If so, you can claim a credit for the excess amount withheld on the line entitled " Excess social security and tier 1 RRTA tax withheld" in the "Payments" section of Form 1040. If this is the case, you cannot use Form 1040EZ or 1040A.

Box 4: This is the Social Security (OASDI) tax withheld, up to the maximum amount each year, and does not need to be reported on your income tax return.

Box 5: Medicare wages and tips - the amount of your compensation in the form of wages and tips that is subject to the Medicare tax. There is no limit on compensation subject to the Medicare tax.

Box 6: Medicare tax withheld. This is the Medicare tax withheld from your pay, without limitation, and does not need to be reported on your income tax return.

Box 7: Social security tips - the amount of tips subject to the Social Security tax.

Box 8: Allocated tips - tips your employer assigned to you in addition to the tips you reported. Your employer will do this if you worked in a restaurant, cocktail lounge, or similar business that must allocate tips, and the amount of tips you reported were less than your share of 8% of food and drink sales.

You must report these allocated tips on your tax return by adding this amount to your wages, salaries and tips as reported in box 1 of your W-2, unless you kept a reliable daily tip record, or if your tip record is incomplete, it still shows that your actual tips were more than the tips your reported to your employer plus your allocated tips. In other words, you should report on your tax return the higher amount – either your actual tips, or your reported tips plus your allocated tips.

Your employer should not withhold any income tax, Social Security tax, or Medicare tax on your allocated tips. You will need to complete Form 4137 – Social Security and Medicare Tax on Unreported Tip Income, in order to figure these taxes. The amount calculated on Form 4137 is then reported on the corresponding line in the "Other Taxes" section of Form 1040. In this case, you will not be able to file Form 1040EZ or 1040A.

Box 9: Advance EIC payment. This represents advance Earned Income Credit payments you received from your employer during the year. It should be reported on the advance earned income credits line of Form 1040 or 1040A. If there is an amount in this box you cannot file Form 1040EZ.

Box 10: Dependent care benefits - the total dependent care benefits that your employer paid directly to you or incurred on your behalf for the care of your dependents during the year. You need to complete Schedule 2 of Form 1040A or Form 2441 - Child and Dependent Care Expenses, if you are filing Form 1040, in order to calculate how much of these benefits are taxable and nontaxable.

Box 11: Nonqualified plans - amounts distributed under a deferred compensation plan. In order to be tax-free, these plans must meet IRS qualifications. Distributions from nonqualified plans are reported in this box for information purposes, and the amount is included in box 1 if it is a taxable distribution from a nonqualified or nongovernmental section 457(b) plan. It is included in box 3 and/or box 5 if it is deferral from a prior year that became subject to social security and Medicare taxes this year because there is no longer a substantial risk of forfeiture of your right to the deferred amount.

Box 12 is used to report other items according to a series of codes that are presented below. These items may require a certain tax treatment or may be shown for informational purposes only.

Box 13 has three boxes for Statutory employee, Retirement plan, and Third party sick pay. There are special rules that may apply in each of these cases.

Statutory employees include full-time life insurance salespeople, certain agent or commission drivers and traveling salespeople, and certain homeworkers. Their earnings are subject to Social Security and Medicare taxes but are not subject to federal income tax withholding. If you are in one of these categories and have related business expenses to deduct, you should report the amount shown in box 1 of your W-2 on Schedule C or C-EZ along with your expenses.

The Retirement plan box is checked when the employee is an active participant in one of the following plans:

• Qualified pension, profit-sharing, or stock-bonus plan, including a 401(k)plan
• Section 403(a) annuity plan
• Section 403(b) annuity contract or custodial account
• Section 408(k) Simplified Employee Pension (SEP) plan
• Section 408(p) SIMPLE retirement account
• Section 501(c)(18) trust
• A plan for federal, state, or local government employees

If the Retirement plan box is checked, there may be special limits on the amount of traditional IRA contributions that you can deduct.

The Third party sick pay box is checked when a third party, such as an insurance company, has made sick payments to the employee.

Box 14 is used for other informational purposes.

Box 15: State and Employer’s state ID number - for state income tax filing purposes.

Box 16: State wages, tips, etc. - your taxable compensation for state income tax filing purposes. The return to be filed and the tax rates vary by state. In many cases, the e-file option in the IRS website permits filing federal and state income tax returns together.

Box 17: State income tax - the state income tax withheld from your pay. This would be reported as income tax withheld in the payment section of the applicable state income tax return.

Box 18: Local wages, tips, etc. - your taxable compensation for local income tax purposes.

Box 19: Local income tax - the local income tax withheld from your pay. This would be reported as income tax withheld in the payment section of the applicable local income tax return.

Box 20: Locality name - name of the local taxing authority, which could be a city, municipality, borough, etc.

Form W-2 - Box 12 Codes

Code A: If your employer could not collect all the social security taxes you owe on tips you reported for the year - for example if your regular pay was not sufficient to cover the taxes you owe - the amount of uncollected social security tax on tips will be reported here. You will need to include these taxes in the Total Tax line on Form 1040, and write "UT" and the amount of the uncollected social security taxes on the dotted line next to the Total Tax line. In this case, you will need to file a return (1040, not 1040A or 1040EZ) and pay these taxes even if you otherwise would not have to file a return.

Code B: Uncollected Medicare tax on tips. This item is the same as code A but for Medicare instead of social security, and should be handled the same way.

Code C: If your employer provides you with group-term life insurance, the cost of the coverage in excess of $50,000 is taxable. This taxable amount is included in box 1 and is reported here for informational purposes. The cost of coverage up to $50,000 is not taxable.

Code D represents the amount of your salary you choose to have your employer contribute to a qualified retirement fund rather than pay to you. Code D is for elective deferrals to a section 401(k) cash or deferred arrangement. It also includes deferrals under a SIMPLE retirement account that is part of a section 401(k) arrangement. This amount is not included in your salaries and wages subject to tax at the time contributed.

Code E is similar to code D but corresponds to elective deferrals under a section 403(b) salary reduction agreement.

Code F: Elective deferrals under a section 408(k)(6) salary reduction SEP (Simplified Employee Pension).

Code G: Elective deferrals and employer contributions (including non-elective deferrals) to a section 457(b) deferred compensation plan.

Code H: The contributions you make as elective deferrals to a section 501(c)(18)(D) tax-exempt organization plan should not have been deducted from your total salaries and wages as reported in box 1. This amount can be taken as a deduction for adjusted gross income. You should enter “501(c)(18)(D)” and the amount on the dotted line right above the line for Adjusted Gross Income” on Form 1040.

Code J: Nontaxable sick pay reported for information purposes only. This amount is not included in boxes 1, 3, or 5.

Code K: 20% excise tax on excess golden parachute payments. An "excess parachute payment" is an amount you receive due a change in a corporation’s ownership or control. This tax must be added into the "Total Tax" line of Form 1040. Write "EPP" and the amount on the dotted line next to the "Total Tax" line.

Code L: Substantiated employee business expense reimbursements. This represents actual business expenses you incurred that were reimbursed by your employer under an "accountable plan". They are reported for information purposes only and are not taxable.

Code M: Uncollected social security or railroad retirement tax on the taxable cost of group-term life insurance coverage over $50,000 (former employees only). This tax must be added into the "Total Tax" line of Form 1040. Write "UT" and the amount on the dotted line next to the "Total Tax" line.

Code N: Uncollected Medicare tax on the taxable cost of group-term life insurance coverage of over $50,000 (former employees only). This tax must be added into the "Total Tax" line of Form 1040. Write "UT" and the amount on the dotted line next to the "Total Tax" line.

Code P: Excludable moving expense reimbursements paid directly to the employee. These are reimbursements of actual expenses incurred and are not included in boxes 1, 3, or 5 as taxable compensation. You will need to take these reimbursements into account and subtract them from the moving expenses you are deducting on Form 3903.

Code Q: Nontaxable combat pay. You can elect to include your nontaxable combat pay included in your earned income for purposes of the earned income credit. This may increase or decrease your earned income credit. You should figure the credit both ways to determine which results in a lower overall tax. If you elect to include your nontaxable combat pay, you must include all of it, and report it on the appropriate line in the Payments section of Form 1040.

Code R: Employer contributions to your Archer MSA (Medical Savings Account). Report on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts.

Code S: Employee salary reduction contributions under a section 408(p) SIMPLE (not included in box 1).

Code T: Adoption benefits (not included in box 1). You need to complete Form 8839, Qualified Adoption Expenses, to see if you can exclude all or part of these benefits from your taxable income.

Code V: Income from the exercise of nonstatutory stock option(s) (included in boxes 1, 3 (up to social security wage base), and 5).

Code W: Employer contributions to your Health Savings Account. These should be reported on Form 8889, Health Savings Accounts (HSAs).

Code Y: Deferrals under a section 409A nonqualified deferred compensation plan.

Code Z: Income under section 409A on a nonqualified deferred compensation plan. This amount is also included in box 1. It is subject to an additional 20% tax plus interest. This tax must be added into the "Total Tax" line of Form 1040.

Social Security

In addition to being a key record for income tax filing purposes, your W-2 is also an important document to keep as a permanent record for social security purposes. It serves as evidence of your periods of employment and payment of social security taxes.