How is w2 calculated

The employee's total earnings from the employer for the year are recorded, along with the amount withheld in taxes from the employee's paychecks, separated into the withholding for federal income tax, Social Security tax, and more.

If the employee also works for tips, a field shows how much money in tips the employee earned for the year. If you work multiple jobs that provide W-2s, you need to input each separately.

When the employee files taxes, the amount of tax withheld according to the W-2 form is deducted from their gross tax obligation. If more tax was withheld than the employee owes, a refund will be issued. However, taxpayers are required to report all salary, wage, and tip income even if that income is not reported on a W W-2 forms include both numbered and lettered boxes that an employer must fill out and reflects how much you earned and taxes withheld.

The lettered boxes on a W-2 include the name and address of you and your employer, your Social Security number, and your employer's EIN and state ID number. Box 1 shows your taxable income, including wages, salary, tips, and bonuses, while Box 2 shows how much federal income tax your employer withheld from your pay.

Box 3 details how much of your earnings were subject to Social Security tax and Box 4 the amount of Social Security tax that was withheld. Box 5 spells out how much of your pay is subject to Medicare tax and Box 6 how much was withheld.

The employee portion of the Medicare tax is 1. If part of your pay is in the form of tips, these boxes show how much you reported in tips Box 7 and how much your employer reported in tips it paid to you Box 8. This box was used to reflect a now-defunct tax perk, so it is left empty. Box 10 reports how much you received from your employer in dependent care benefits if applicable.

This box details how much deferred compensation you received from the employer in a non-qualified plan. Box 12 details other types of compensation or reductions from your taxable income and a single or double letter code that corresponds to each.

It might include, for example, contributions to a k plan. Codes are detailed in the IRS' W-2 instructions. This box has three sub boxes designed to report pay that is not subject to federal income tax withholding, if you participated in an employer-sponsored retirement plan , or if you received sick pay via a third-party, such as an insurance policy. Box 14 allows an employer to report any other additional tax information that may not fit into the other sections of a W-2 form.

A few examples are state disability insurance taxes withheld and union dues. The last six boxes on a W-2 all relate to state and local taxes, including how much of your pay is subject to these taxes and how much was withheld. Form W-4 is completed by every employee for withholding purposes.

The employer uses the information to determine how much tax to withhold from the employee's paychecks. Most employees must fill out this form when they start working for a company. This usually arrives by the end of January of the following year.

Form W-2G is a tax form that a gaming facility such as a casino may send you if you received winnings from gambling in the prior year. Students receive a E statement for any year in which they paid interest on a federal student loan. Students also receive a T statement reporting college tuition expenses that might entitle students to tax deductions or credits. Your employer is required to provide you with copies of your W-2 each year if you are eligible to receive one.

The deadline for companies to provide this form is typically by the end of January or early February following the tax year that just ended. This is your total taxable wages for federal income tax purposes. Box 2: Federal income tax withheld. This amount represents the total amount withheld from your paycheck for federal income taxes. Box 3: Social Security Wages. This represents income subject to Social Security tax. There is a Social Security wage base each year and once you earn up to that amount, you no longer will have deductions for Social Security tax.

Recruitment in the finance industry is challenging. Call Now November, Is a W-2 the Same as a Pay Stub? Company-Sponsored Retirement Plan Participation. Give them our handy W-2 vs Last Pay Stub handout. Download The Handout. What do all the boxes on my W-2 mean? Box 2: Federal Income Tax Withheld Federal income tax withheld is the amount of money withheld from your wages reported in Box 1.

Box 3: Social Security Wages The amount of earnings your employer paid you - not including tips - subject to Social Security tax. Box 5: Medicare Wages and Tips Medicare wages and tips are the total amount of earnings your employer paid you subject to Medicare tax. Box 6: Medicare Tax Withheld Medicare tax withheld represents 1. Box 8: Allocated Tips This box shows tip income allocated to you by your employers. Box Dependent Care Benefits The total amount paid into your dependent care flexible spending account for the year.

Box Compensation and Benefits Click to see the codes included This box is used to indicate a compensation or benefit by code. Include this tax on Form B — Uncollected Medicare tax on tips.

D — Elective deferrals to a section k cash or deferred arrangement. E — Elective deferrals under a section b salary reduction agreement. F — Elective deferrals under a section k 6 salary reduction SEP. G — Elective deferrals and employer contributions including non-elective deferrals to a section b deferred compensation plan. H — Elective deferrals to a section c 18 D tax-exempt organization plan. J — Nontaxable sick pay information only, not included in Boxes 1, 3, or 5.

L — Substantiated employee business expense reimbursements nontaxable. Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. By Mark Kennan Updated February 04, Internal Revenue Service: Form W Related Articles.