What is Form W-2?
W-2 is the annual salary summary form obtained from the employer at the beginning of each year, which summarizes your total salary and tax deductions for the previous year. The employer will give you this form no later than February. If you do not receive it, please contact the employer to ask for it.
W-2 has a very significant feature (or it is different from 1099-NEC). Once the employer decides to issue W-2 to the employee, he must also pay certain social security benefit tax and medical security tax (also known as FICA). This is the tax paid in advance for employees to receive social security benefits (usually guaranteed pensions) and medical security benefits in the future. In principle, the amount of FICA is paid jointly by you and the employer, and the tax rate is 15.3% in total: the employer has to pay half (7.65%) for you before paying wages every month; the other half is paid by yourself. The salary you get often has a decimal point, because the employer directly deducts the part of the tax that should be handed over to the tax bureau (7.65%) from the salary before the salary is paid.
There are many grids and numbers in the W-2, which express your total salary, and the half of the federal withholding tax you pay mentioned above, as well as other tax items (such as state, city) withholding taxes, etc. The deduction of these taxes is determined according to the number of family members of each employee, the income level of the spouse and other factors, and there is no one-size-fits-all standard. So if you want to ask: “I earned ** million last year, should I pay taxes and how much should I pay?” Then the answer must be combined with the contents of all the grids to know.
The format and structure of the W-2 issued by each unit may be slightly different, but the information inside is the same, and the year and purpose will be clearly written. It is common to see that a unit sends itself many copies, or even a few W-2s that are basically the same, but in fact, it will be clearly marked on the tax form as Copy A, B, C, D and Copy 1, 2. These tables are used to calculate taxes for different departments. No matter which ones you have, you should keep them for tax declaration.
Let’s take a look at the specific content of the table:
Part 1 Basic identity information
Grid a Employee’s Social Security number: Employee’s social security number
Grid b Employer’s identification number (EIN): Employer’s federal tax ID number
Grid c Employer’s name, address, and ZIP code: Employer’s name, address, and zip code
Grid d Control number: Control number for employer identification
Grid e Employer’s first name and initial Last name: your name
Grid f Employee’s address and ZIP code: your address and zip code.
NOTE: If you have changed your name, please report the business and update your profile; if you have recently moved, just include your current address on your tax form
Part 2 Federal Tax Information
Grid 1 Wages, tips, other compensation: Total income used to calculate federal taxes, including taxable benefits, such as group life insurance. This income does not include amounts such as 401(k) plans, 403(b) plans, tax-free HSAs (Health Saving Accounts), and Wageworks Commuter benefit plan commuter service plans.
Grid 2 Federal income tax withheld: Your prepaid federal tax, that is, before each wage is paid, the employer will help you deduct the part of the tax paid to the federal government from your wages. It is calculated based on the annual progressive tax rate on the basis of grid 1 above.
Grid 3 Social security wages: The amount of income used to calculate the social security tax. The cap is subject to adjustment each tax year, and there is a cap on wages that are subject to Social Security tax. In 2022, the maximum wage amount subject to Social Security tax is $147,000.
Grid 4 Social security tax withheld: The social security tax you pay. 6.2% tax is levied on Box 3 income as the tax base. If you have two paychecks for the 2022 tax year and your total payroll subject to Social Security taxes exceeds $147,000, you may have paid more tax than required. You can claim a portion of your Social Security tax refund on your tax return, Form 1040.
Grid 5 Medicare wages and tips: The total amount of income used to calculate Medicare benefits. There is no upper limit to this amount.
Grid 6 Medicare tax withheld: The total amount of federal Medicare tax you pay. The Medicare tax is a flat rate of 1.45%. But grid 5 exceeds a critical value, and the excess part will be levied an additional 0.9% medical security tax. In 2022, impose a 2.35% Medicare tax on all wages over $200,000 (the regular 1.45% tax, plus a 0.9% tax). Note: $250,000 – couples filing jointly; $125,000 – married taxpayers filing separately).
Grid 7 Social security tips: tip income. If there are no pre-tax benefits (such as 401k), the tip income in box 7, added to the salary amount subject to social security tax in box 3, is equal to the taxable salary amount in box 1. That is: Box 7 + Box 3 = Box 1; if there are pre-tax benefits, then Box 7 + Box 3 = Box 5.
Grid 8 Allocated tips: Consumption allocated by the employer. This amount is not included in boxes 1, 3, 5 or 7 and you need to add it to your taxable income yourself.
Grid 10 Dependent care benefits: This is the reimbursed care expenses of dependents. This fee is provided by Flexible Spending Accounts (Flexible Spending Accounts, FSA) or employers. This item lists the amount of your salary used to support children or family members/Dependent. Benefits up to $5,000 are not taxable. Anything over $5,000 is taxable and needs to be added to boxes 1, 3 and 5 as taxable income. Dependent care benefits need to fill in Form 2441, Child and Dependent Care Expenses to calculate and distinguish between taxable and non-taxable parts.
Grid 11 Nonqualified plan: the amount of the non-standard plan. This shows any amount your employer has allocated to you from a nonqualified deferred compensation/non-standard (in-plan) continuation of compensation plan or a nongovernmental section 457(b) plan/non-government 457(b) pension plan. The amount in Box 11 has been included in the taxable wage income in Box 1.
Grid 12 See instructions for box 12: It contains a lot of items. This item on W-2 uses a single or double letter code in uppercase to indicate the content of the item. Among them, our most common items here are: D——401(k) pension; DD——employer-sponsored medical insurance; C——group life insurance of more than $50,000, etc.
Grid 13 There are 3 options in this box. If there is a corresponding situation, W will be checked: Statutory Employee, Retirement Plan, Third-party Sick Pay.
Statutory employee: A self-employed person who can be considered an employee/employee, meaning an independent contractor who qualifies as an employee.
This is a special category of people. According to the IRS, independent contractors who qualify as employees include: agents or drivers on commission; full-time life insurance sales agents; home-made items using materials provided by their employers, such as piecework; full-time travel or urban salespeople wait.
Retirement plan: Those who participate in the retirement plan. Think 401(k) plan, 403(b) plan, SEP-IRA, SIMPLE-IRA or other retirement benefit plan. If you participate in a retirement benefit plan, the box will be checked and IRA deductions will be limited based on your income.
Third-party Sick Pay: Third-party paid sick pay. This means that your sick pay is distributed by the employer’s third-party insurance company, rather than being received directly from the employer as ordinary wages. Although sick pay is subject to Social Security and Medicare taxes, box 1 does not include sick pay.
Box 14 Other: Employers can report other tax information in this box, and need to briefly explain the purpose. Things like union dues, tuition assistance from employers, or after-tax retirement benefit plan allocations can all be reported here.
Part 3 State and local tax information
Boxes 15-17 record items related to state taxes.
Grid 15 State & employer’s state ID No: Employer’s state and identity number.
Box 16 State wage, tips, etc. : The amount of wages you can use to calculate state government taxes. If you worked in a different state during the year, the corresponding amount earned in the relevant state will be shown.
Grid 17 State income tax: Your total prepaid tax in the corresponding state. If you choose to list the deductible amount, the total amount can be filled in Schedule A of the 1040 form.
Boxes 18-20 record items related to local taxes. Box 18 Local wage, tips. etc. : The gross wages you can use to calculate local government tax.
Grid 19 Local income tax: The total amount of prepaid taxes you have paid in the local government. If you choose to list the deductible amount, the total amount can be filled in Schedule A of the 1040 form.
Grid 20 Locality name: the name or brief description of the place.
Personal tax must be submitted annually by yourself or your family or by an accountant, and cannot be done by the unit or institution you work for. Normally, the period from the end of January to April 15th is the time window for summarizing and declaring the income of the previous year, and fines may be incurred if it is overdue. In addition to the federal tax bureau IRS at the national level, various tax forms and material submission departments may also have state and local tax bureaus, financial supervisory bureaus and other departments. In order to standardize the large-scale tax declarations across the country every year, the formal “organization” or “person” that gives you funds/assets should provide relevant vouchers and tax forms before you file taxes, such as W-2 or 1099-NEC for employers to pay wages, 1099-INT for the bank to issue interest, 1099-G for the government to issue unemployment benefits, etc. It should be noted that if there are errors/omissions in the personal declaration, there may be a progressive fine according to time, please make sure to pay the tax in time; at the same time, please collect or scan all tax forms, bills or vouchers for tax inspection purposes.
The opinions expressed by HHL Advisors Group are for information sharing only and do not constitute any legal advice.
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