W-2 Form Explanation

By Joan Miller
W-2 information must be reported on an individual's tax return

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Form W-2 reports employees' annual earnings and withholdings to governmental agencies, including the IRS and Social Security Administration (SSA). Instructions for Form W-2 preparation explain complexities, conditions and exclusions.

Identification Information

Boxes "a," "e," and "f" request the employee's Social Security number and full address. Similarly, boxes "b" and "c" require the Employer Identification Number (EIN) and full address.

Wages

Box 1 reports the total wages actually paid plus moneys deemed taxable as if wages, for example, fringe benefits, expense reimbursements, contributions to medical/health savings accounts, tips, certain insurance for medical services, and moneys paid on behalf of employees (whether current or former).

Boxes 3 and 7 contain amounts taxable as wages and tips but for Social Security tax purposes. Some amounts may not actually have been paid by the employer. Tips are wages. Employers' estimates of tips are reported in accordance with IRS regulations. For 2010, the maximum amount, taxable for Social Security, is $106,800.

Withholding

Box 2 shows the amount of withheld income tax, in accordance with the standard table of withholding or by employees' written instructions. Earned Income Credit (EIC) amounts, paid in advance, are wages for withholding purposes. See Box 9, labelled Advance EIC payment.

Boxes 4 and 6, respectively, report Social Security and Medicare withholding. Note that amounts of employees' taxes paid by employers constitute taxable wages, reportable in Box 1.

Box 4 represents only the employee's share of Social Security taxes and cannot exceed $6,621.60 for 2010.

Other Reporting Issues

Boxes 9-14 address other issues affecting employees' taxable income.

Box 9 requests the total advance EIC payments, paid to the employee.

Box 10 addresses taxable aspects of the dependent care assistance program, a complex issue for which specific conditions and exclusions apply.

Box 11 addresses certain distributions from non-qualified retirement plans, so as to address potential timing differences for distributions covering more than one year.

Box 12 is for a long list of specific issues. Employers enter specific Codes (labelled A to CC) and the associated amount. The instructions explain.

Box 13 has three small boxes, regarding the employee's status. Employers check all that apply. For the first box, a statutory employee is one whose income is subject to Social Security and Medicare taxes but not to withholding. The second box refers to employees who qualify as active in a retirement plan. The third box, labeled "third-party sick pay," is for companies, not the employer, which pay sick benefits to the employee.

Box 14 addresses other taxable income issues not addressed elsewhere in the W-2.

Boxes 15-20 address issues where state and local income tax laws may differ from federal laws. Each box is appropriately labelled as to the amount to be inserted.

Filing requirements

W-2 is a multi-page form. The IRS, SSA, state and local taxing authorities all need a copy, as also does each employer and employee. The employer files the IRS and SSA copies directly with those agencies and provides the employee with sufficient copies to meet the other reporting needs. W-2 Forms may be filed electronically or on paper.

About the Author

Joan Miller’s research and writing spans two decades. Her work has been published in the United States and Canada in professional journals, books and national newspapers. She writes about accounting, law, economics, bioethics, medical care delivery systems, math and science.

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