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: