Form W-2: Your Guide to Annual Wage and Tax Reporting

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Form W-2, the Wage and Tax Statement, is the IRS form an employer uses to report what it paid an employee during a calendar year and how much tax it withheld from that pay. The employer sends a copy to the employee, files one with the Social Security Administration (SSA), and the figures flow into the employee’s individual income tax return.

What Is Form W-2?

The W-2 is an annual summary of employment income, prepared by the employer rather than the worker. It covers wages, salary, bonuses, tips and certain benefits, and it shows the taxes taken out of each paycheck over the year. A W-2 is not a tax return. It is an information return: a record you use to complete your own return and that the government uses to check it.

Every W-2 reflects the prior year. A form you receive in January 2025 reports pay and withholding for 2024. If you had more than one employer during the year, you get a separate W-2 from each, and you report all of them on your return.

Who Has to Issue a W-2

Any employer that pays an employee wages, salary or other compensation must issue a W-2 when either of two conditions applies: the employer paid $600 or more during the year, or it withheld any income, Social Security or Medicare tax, regardless of the amount. This applies to employees only. Independent contractors and other self-employed workers do not get a W-2. A business that pays a contractor typically reports that income on Form 1099-NEC instead.

The employer’s obligations follow a fixed calendar:

1. By January 31: furnish Copy B (and Copy 2 for state and local filing) to each employee, by mail, in person or electronically if the employee consented.
2. By January 31: file Copy A of every W-2 with the SSA, together with Form W-3, the transmittal form that totals all the W-2s the employer issued.
3. State filing: send copies to state or local tax agencies where required.

The January 31 date gives employees time to file before the usual mid-April deadline. The SSA processes the wage data and shares the income tax portion with the IRS.

How to Read a W-2, Box by Box

• Boxes a to f: your Social Security number, the employer’s Employer Identification Number (EIN), the employer’s name and address, a control number used by some payroll systems, and your name and address.
• Box 1, wages, tips, other compensation: income subject to federal income tax. This is the number that goes on the wages line of Form 1040.
• Box 2, federal income tax withheld: what your employer sent to the IRS on your behalf, based largely on your Form W-4.
• Boxes 3 and 4: wages subject to Social Security tax and the Social Security tax withheld. The employee rate is 6.2%, applied up to an annual wage base that is adjusted each year.
• Boxes 5 and 6: wages subject to Medicare tax and the Medicare tax withheld. The employee rate is 1.45% with no wage cap. Employers must also withhold an additional 0.9% Medicare tax on wages above $200,000 paid to an employee, and that amount is included in Box 6.
• Boxes 7 and 8: Social Security tips and allocated tips, for employees in tipped jobs.
• Box 10: dependent care benefits provided by the employer.
• Box 11: distributions from a nonqualified deferred compensation plan.
• Box 12: amounts identified by IRS letter codes. Code D, for example, shows elective deferrals to a 401(k), and code DD shows the cost of employer-sponsored health coverage (reported for information, not taxed).
• Box 13: three checkboxes: statutory employee, retirement plan participant, and third-party sick pay. The retirement plan box matters because it can limit whether traditional IRA contributions are deductible.
• Box 14: an open field for other items the employer chooses to report, such as union dues or state disability insurance contributions.
• Boxes 15 to 20: state and local wages and the state and local income tax withheld, with the employer’s state ID number.

Why Box 1 and Box 3 Rarely Match

Readers often assume the wage boxes should show the same number. They frequently don’t, because different pre-tax deductions have different tax treatment. Traditional 401(k) deferrals reduce income tax wages (Box 1) but are still subject to Social Security and Medicare tax (Boxes 3 and 5). Health insurance premiums paid through a cafeteria plan generally reduce all three.

Hypothetical example

Assume an employee earns a $60,000 salary, contributes $5,000 to a traditional 401(k), and pays $2,000 in health premiums through a cafeteria plan. Assume wages stay below the Social Security wage base and there are no other deductions.

Box 2 depends on the employee’s W-4 and pay schedule, so it can’t be derived from the salary alone. The $53,000 in Box 1 is also not the same as gross income in the everyday sense of total pay before deductions; it is the taxable wage figure after pre-tax exclusions.

How the W-2 Is Used at Tax Time

When you file, you report Box 1 wages from all your W-2s, compute your total tax liability, and subtract the federal income tax withheld in Box 2. If withholding exceeds what you owe, the difference comes back as a refund. If it falls short, you pay the balance with your return, and a large shortfall can trigger an underpayment penalty.

The IRS receives the same W-2 data and compares it with your return. If you report less income than your employers reported, expect a notice proposing additional tax, and possibly an audit. The duty runs the other way too: you must report all wages and tips you earned, even income that never appeared on a W-2, such as unreported cash tips.

The figures also feed other calculations. Box 1 wages are a starting component of adjusted gross income and, from there, of modified adjusted gross income, which sets eligibility for many credits and deductions. Separately, the SSA records your Social Security wages each year, and those earnings determine your retirement and disability benefits.

Limitations and Errors

A W-2 covers only one employer’s pay. It says nothing about investment income, self-employment earnings or income from another job, so it cannot show your full tax picture or tell you whether your total withholding was enough. Two jobs each withholding as if they were your only income can leave you under-withheld even though each W-2 looks correct.

Mistakes happen, such as a misspelled name, a wrong Social Security number or incorrect wage totals, so check the form against your final pay stub for the year. If something is wrong, ask the employer for a corrected form, called Form W-2c. If a W-2 never arrives, ask the employer first; a former employer is still required to send it. If that fails, contact the IRS and, if necessary, file using Form 4852, a substitute for Form W-2, based on your own records.

W-2 Compared With Related Forms

• Form W-4: the Employee’s Withholding Certificate, which you fill out for your employer, usually when you start a job. It tells payroll how much federal income tax to withhold. The W-4 drives the withholding; the W-2 reports the result at year end. Updating your W-4 is how you change next year’s Box 2.
• Form 1099-NEC: reports payments to nonemployees, such as freelancers, for services. No income or payroll tax is withheld, so the recipient generally owes self-employment tax.
• Form 1099-MISC: reports other miscellaneous income, such as rents or prizes, where no withholding typically applies.
• Form W-3: the employer’s transmittal to the SSA. Employees don’t receive it.
• Form W-2G: despite the similar name, it reports certain gambling winnings, issued by casinos and other gaming operators.

The Bottom Line

Any employee filing a federal return depends on the W-2, since Box 1 wages and Box 2 withholding drive the refund or balance due. Check each form against your final pay stub and report every W-2 you receive, because the IRS compares that data with your return. If you hold more than one job, review your W-4 so total withholding covers what you owe.