Tax season is right around the corner, and those who are expecting big refunds are champing at the bit to get their returns prepared. But before you can expect to file an accurate tax return, there's one form that nearly everyone will need to get -- and fortunately, it should come by the end of January.
Anyone who was an employee should receive Form W-2 from their employers. On it, you'll find critical tax information that you'll need in order to fill out your tax return. In particular, with information both on income and on taxes that got withheld from your paychecks over the course of the year, anyone who expects a refund will rely on getting their W-2 quickly in order to calculate how much the IRS owes them.
Below, we'll look closely at what you'll find on Form W-2 and how you'll be able to put it to use in your tax preparation.
Image source: IRS.
Boxes a to f: Information about you and your employer
Most of the left side of Form W-2 goes toward providing personal information about you and your employer. You'll see your Social Security number, name, and address, as well as your employer's tax identification number and address. If you see any discrepancies in this information, it's important to remedy it quickly in order to avoid potential red flags at the IRS.
Boxes 1, 3, and 5: Wages, tips, and other compensation
These three boxes have different measures of your taxable wages. Box 1 is the most important number for federal income tax purposes, as it has the amount that typically goes on your return and includes adjustments for various tax breaks. Boxes 3 and 5 reflect the fact that taxable wages for Social Security and Medicare purposes can be different, as not all tax breaks that reduce taxable income for income tax purposes apply to Social Security and Medicare payroll taxes.
Boxes 2, 4, and 6: Withholding taxes
These three boxes reflect amounts taken out of your paychecks over the course of the year. Box 2 has the total amount withheld toward federal income taxes, which you'll include on your 1040 form and use to determine the amount of any refund you'll get. Box 4 reflects the 6.2% payroll tax rate on Social Security, while Box 6 indicates the corresponding 1.45% rate for Medicare tax withholding. Those two payroll tax numbers generally aren't important for income tax purposes, although some who work multiple jobs and earn wages above the Social Security maximum limit might be able to use them to claim an additional refund.
Boxes 7 and 8: Tips
Tips have special rules, as those who work for companies where tips are common, such as restaurants or taxi companies, have to report tip income to their employer. Box 7 includes actual tips paid, while Box 8 applies if your employer has many employees and automatically allocates an amount of tips to you.
Boxes 10 and 11: Dependent care benefits and nonqualified plan distributions
If you get dependent care assistance benefits from your employer or make flexible spending account contributions, then they'll get reflected in Box 10. If you have received distributions from nonqualified retirement plans from your employer in 2019, they'll show up in Box 11.
Boxes 12 and 14: Details on tax breaks and other information
Boxes 12 and 14 include additional information, much of which often refers to tax-favored items like excluded income from health insurance benefits. This list of codes from the IRS will help you understand exactly what your employer is saying in Box 12. Some of these items might be needed for your return, while others are merely for information. In addition, Box 14 is there to help with information not covered under the list of Box 12 codes.
Box 13: Special status
Those who qualify as statutory employees, are participants in a retirement plan, or are eligible to get third-party sick pay might see one or more of these checkboxes checked off in Box 13. These special statuses can have impacts on your tax calculations, so it's important to know about them.
Boxes 15 to 20: State and local tax information
State and local tax laws can differ from federal law, so the numbers in Boxes 15 through 20 won't always be the same as the corresponding boxes higher up on the form. In general, though, you should be able to figure out where they came from based on the federal numbers and the specific provisions that apply in your state or locality.
Worth the wait
It's theoretically possible to prepare your taxes without your W-2, if you can track down the information that will go on it by other means. However, since the due date for your employer to get your W-2 to you is Jan. 31, it's easiest to wait and make sure you have the right numbers on your return.
