W2 Explained

When must an employer file a W-2:

If you work multiple jobs, you may receive a W-2 from each employer who paid you more than $600 or paid you and withheld taxes.

Employers are not required to issue a W-2 till January 31 (or next business day if on a weekend), meaning it must be either postmarked or posted electronically in your employer’s payroll portal by that date. If you don’t receive your W-2 by the second week in February, speak to your employer to confirm your mailing address or email address.  If you failed to update your address before January your employer is legally able to charge you a service fee to handle sending it again.

Be sure to hold on to all tax documents for three to seven years, as recommended by the IRS. You’ll need these records in case you’re ever audited.

If you’re an independent contractor, you’ll probably receive a Form 1099-MISC from the people or organizations you worked for. You’ll need a 1099-MISC from each client who paid you more than $600 to file your taxes.

How to Read a W-2

A W-2 can seem like an overwhelming amount of information initially. But once you know how to read a W-2, it’s not all that complicated! Here’s the breakdown, so you know exactly what you’re looking at.

Boxes A-F: Employee & Employer Basic Information

These are pretty self-explanatory fields containing your and your employer’s basic information. Note that your employer may use Box D to include a code to identify your form or leave it blank.

Box 1: Wages, Tips, and Other Compensation

This number is calculated for TAXABLE WAGES using your GROSS pay from your last paycheck of the year minus pretax deductions (e.g., 401(k), medical, dental, HSA).

We often get employees calling us telling us that there is an issue with their W2 REPORTABLE wages. Employees often don't understand REPORTABLE TAXABLE wages vs ACTUAL GROSS wages as far as the IRS is concerned. So if you had any Pre-Tax Benefits or Retirement (401k/403b/Simple IRA) Contributions those lower you taxable income.

Here is an explanation.

Box 2: Federal Income Tax Withheld

This is the total amount you paid to the FEDERAL government in taxes.

Box 3: Social Security Wages

This number is calculated using your GROSS pay from your last paycheck of the year minus PRETAX DEDUCTION EXCEPT for any retirement 401(k) contributions.

Box 4: Social Security Tax Withheld

This is the total amount you paid to the FEDERAL government for social security tax (your employer matches this amount). The tax rate is 6.2% and only applies to the first $142,800.

Box 5: Medicare Wage and Tips

This can be calculated using your GROSS pay from your last paycheck of the year minus PRETAX DEDUCTIONS EXCEPT for any retirement 401(k)/403(b)/Simple IRA contributions.

Box 6: Medicare Tax Withheld

This is the total amount you paid to the FEDERAL government for Medicare tax (your employer matches this amount). The Medicare tax rate is 1.45%. Additional Medicare tax of 0.9% on earnings over $200,000 for single filers, often called the luxury tax.

Box 10: Dependent Care Benefits

The amount of dependent care benefits you elected if any.  If you deferred pretax money into a flexible spending account to pay for dependent care costs, or if your employer provided you money for dependent care costs under a dependent care assistance program, that amount would be shown here.

Box 11: Nonqualified Plans

If applicable, this is the amount an employer paid you from a nonqualified deferred compensation plan. These plans are generally only found in Executive level jobs as a type of bonus.

Box 12: Codes

Box 13: Three Check Boxes

Statutory Employee Status: Your earnings are subject to Social Security and Medicare taxes but not federal income tax withholding. 

Third-party Sick Pay: You received sick pay under a third-party insurance provider.

Retirement Plan: You were an active participant in a retirement plan such as a 401(k) in the past tax year. 

Box 14: Other

Your employer would use this field to report anything that doesn’t fit in a different area on the form. This might include nontaxable income, union dues, uniform payments, and health insurance premiums. Also state programs like Massachusetts Paid Family & Medical Leave (MAPFML): This is the amount you paid to the State of MA in taxes for MA Paid Family Medical Leave. Your employer would also report this in Box 14, if applicable.

Box 15: State & Employer’s State ID Number

Your employer enters their details here.

Box 16: State Wages, Tips, etc.

This number is calculated using your GROSS pay from your last paycheck from the year minus pretax deductions (e.g., 401(k), medical, dental, HSA).

Box 17: State Income Tax

This is the total amount you paid to the STATE for income tax.

Boxes 18-20: Local Tax Information

If applicable, your employer will use these boxes to report any city or local income and taxes.This is where your employer would report any applicable codes, such as nontaxable sick pay, adoption benefits, pre-tax benefits, or designated Roth contributions under a section 401(k) plan that they provided to you. See the complete list of codes below:

If you found this guide helpful, Audax HR is here to support you beyond tax season. From payroll clarity to people-first HR solutions, our team is committed to helping you stay informed, compliant, and confident. Connect with Audax HR to learn how we can support your workforce every step of the way.