How to Read Your W-2
When you receive your paycheck, the net pay is usually the focus. However, it’s crucial to pay attention to your W-2 form during tax season. Here’s a simplified guide to help you read your W-2:
1. Employee Exclusive
As an employee, you’ll get a W-2; if you’re an independent contractor, it’s Form 1099-NEC. Confirm with payroll if it seems off.
2. Reporting Criteria
You’ll receive a W-2 if you earned $600 or more in cash or benefits, regardless of hours or employment duration. Exceptions apply if taxes are withheld or certain conditions are met.
3. Deadline
The IRS has mandated that all Employers must provide you with the W-2 by Jan 31, 2024, either by mail or electronically if you consent.
4. Read Your W-2 Online
If your employer allows, consider going paperless and receive your W-2 electronically.
5. Reporting Year
Your W-2 reflects earnings from the calendar year, even if paid in the following year.
6. Breakdown of W-2 Sections
- Personal Info: SSN, employer’s EIN, and address.
- Wages and Withholding: Boxes for taxable wages, federal taxes, Social Security, and Medicare.
- Box 1 Shows your untaxed income for the year while box 2 shows your federal taxes.
- Generally, box 2 should be 10% of your income. Less could mean that you owe or will get a smaller refund. More than 10% could mean a reduced amount owed or a greater refund.
- Other Information: Boxes for tips, allocated tips, benefits, nonqualified deferred compensation, and more.
- State and Local Tax: Details about state and local taxes
7. Corrected Form
If you spot an error, ask for a corrected W-2 before filing your taxes. For instance, if you notice your social security number is incorrect or name is misspelled or not enough taxes taken out are reported. Ask your employer about the discrepancies.
8. Lost Forms
If you lose your W-2, check online if your company uses a payroll service. Otherwise, contact your payroll or HR department.
9. No Form Received
Contact your employer at the beginning of February. Still, file your taxes on time even if you haven’t received your W-2. Consider an extension and contact the IRS if needed.
Record Keeping
Keep your W-2 for at least three years after filing. It can be useful for Social Security benefit inquiries.
Reading your W-2 doesn’t have to be daunting. This simplified guide will help you understand the key elements and ensure a smooth tax filing process. If you have more questions feel free to contact us.