The W-2 is an important tax form that everyone needs to
understand. The W-2 is a wage and tax statement, since it shows income and taxes
paid during the year. The W-2 lists the taxes withheld by your employer.
At the
beginning of the year, each employee must receive this form by his or her
employers. You will receive a W-2 statement for each employer you worked for.
What information is found on the W-2, how do we provide the
information for the W-2 and who is responsible for providing the W-2?
The main significance of the W-2 form is that it tells the
employee how much money was earned, and how much money was withheld for taxes.
There are 20 boxes of information present on the W-2 form
and all belongs to the varying forms of compensation you may be received as an
employee.
Boxes 1
thru 14 deal with employee compensation on a federal level.
Boxes 7
and 8 have to do with receiving tip income, and the amount of the income that
is eligible for social security tax.
Boxes 9
and 10 are for earned income credit advance payments, and any form of dependent
care benefits you may have received, that are taxable income.
Boxes 11 -14 are for retirement plan income deductions;
pre-tax contributions such as to 401(k)s, SEPs, IRAs, MSAs, and HSAs, would
fall into this category, and any contributions made that are pre-tax
contributions would be shown here.
Boxes 15-20
are for reporting earned income as it applies to your individual state, or the
state in which you worked. Quite often, taxpayers reside in one state, and work
in another.
If this is the case, when you complete your tax return for the
year, you will file a return for the state in which you reside, and the state
in which you worked, as a non-resident filer.
When you receive your W-2, you normally receive 4 copies;
- One
for your federal tax return
- One
for a state return
- One
for an additional state that may or may not be needed, and
- One
for you to keep for your records.
There are additional boxes shown on the W-2 that are
alphabetically identified, as a thru f.
These boxes contain information about the recipient and the
company issuing the W-2. Your social security number, your address, and your
employee number if you've been assigned one. These boxes are also for your
employer information, their federal identification number, their address, and
telephone number is usually also listed.
What items may be included in your wages, tips, and
compensation? Unbelievably, it can include more than just your income from your
weekly check. Any benefits received as bonuses, prizes, awards, and noncash
payments may be included in your wage and income information.
If you receive payments from taxable benefits of a section
125 cafeteria plan, (if you choose cash payment) will be shown as wage income.
Employer
paid contributions for qualified long-term care services to the extent that the
contributions are flexible and controlled in part by the employee are taxable. Employer
paid childcare services is also included as income to the employee.
When it comes to deferred payments, pre-tax and after tax
contributions to a 401(k), an IRA, a ROTH IRA, or an HAS,
some of the benefits and contributions made by your employer may or may not be
included as taxable income, and must be included as other compensation.
Quite
often, income included in this manner won't be subject to federal withholding,
but will be subject to social security and Medicare taxes, so it there fore
must be included for those taxes to be properly computed.
Currently, there is no cap on Medicare tax in relation to
the level of income reported; with social security, the limit is the first
$94,200 of earned income is taxable, anything above that amount, is not.
It
should also be noted here, that any advance EIC payments, or advance earned
income payments should not be taxed with federal withholding, Medicare, or
social security.
You can get the instructions for filling out the W-2 form by visiting the
website at the URL http://www.irs.gov/pub/irs-pdf/iw2w3.pdf.
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