How does a W-2 form work and what does it mean?

During tax season, if you work full-time and earn at least $600, your employer will provide you with an IRS Form W-2, which reports your wages and taxes withheld. This form is crucial for filing your taxes as it typically affects the amount of your refund or any taxes you owe.

CNBC Select provides guidance on obtaining a W-2, the information it contains, and how to incorporate it into a tax return.

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What is the purpose of a W-2 form?

The W-2 form contains essential details about your earnings, taxes withheld, and any employer-provided benefits for the past year.

Your employer sends you a W-2 form containing salary and wage information, which you use to accurately file your taxes. If you've worked for multiple employers and earned at least $600 in wages from each of them, you may receive multiple W-2 forms in a year.

Completing your tax return is made easier when you file your taxes, as the information on your W-2 will help you fill out the necessary forms. With online tax software like TurboTax, you may not need to manually input any numbers, as it can automatically import W-2 information from over a million employers. You can also upload your W-2 from your computer or use the TurboTax app to take a photo of it.

If you're seeking a more affordable tax software option and don't require specialized features such as live, individual support with a tax professional, TaxSlayer is a suitable choice. Its paid plans allow you to file taxes for any situation, with the only difference being the level of technical support and tax advice provided. Additionally, TaxSlayer enables you to import your W-2s, and the software will automatically fill in your income and wages.

What does the W-2 form tell you?

The W-2 form provides you with crucial details about your retirement contributions, employer-paid health insurance, and dependent care benefits, in addition to your income and withholding.

Here's how to read your W-2 form:

• Boxes A to F show identifying information about you and your employer.
• Your employer paid you a total taxable income, which was then withheld in federal taxes, as shown in boxes 1 and 2.
• The amount of your pay that was subject to Social Security and Medicare taxes, as well as the amount that was withheld, is displayed in boxes 3 to 6.
• If you earned tips, Boxes 7 and 8 will inform you of the amount of tip income that was subject to Social Security tax and the amount your employer allocated to you.
• Box 10 reports how much your employer paid you in dependent care benefits.
• The amount you received in deferred compensation is shown in Box 11, which TurboTax refers to as the pay you receive outside of tax-advantaged retirement plans for work done in previous years, usually after leaving employment or retiring.
• The W-2 instructions from the IRS provide a single or double-letter code for various types of compensation or income reductions, such as a 401(k) plan or health savings account contributions, which are detailed in Box 12.
• The box labeled 13 indicates whether you were a statutory employee, participated in an employer-sponsored retirement plan, or received sick pay from a third-party source, such as an insurance company.
• Box 14 is used for any information that does not fit into other boxes, such as uniform payments, union dues, and health insurance premiums deducted.
• Boxes 15 to 20 contain state and local income tax information.

When are W-2s sent out?

Employers must provide W-2s to employees and the government by Jan. 31. W-2s are typically sent via mail, although some employers offer electronic versions.

You will receive a W-2 from every employer that paid you $600 or more during the year, except for independent contractors who will receive Form 1099 instead.

If you haven't received your W-2s by mid-February, contact your employer. It's possible that the HR department doesn't have the correct address on file or you may have missed out on communication about online access to your tax documents. Regardless, reaching out to your employer should typically resolve the issue.

If you need to file your taxes and don't have a W-2, you can contact the IRS at 800-829-1040. They will require your personal information, including your name, address, phone number, Social Security number, and dates of employment. Additionally, they will need your employer's information, such as their name, address, and phone number. After the call, the IRS will contact your employer and request the missing W-2.

Ensure that you have your W-2 before April 15 (or April 17 if you reside in Maine or Massachusetts), regardless of whether you have all the necessary documents.

Bottom line

To complete your tax return, you will need to include Form W-2, which contains important income and tax information provided by your employer.

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At CNBC Select, our goal is to deliver top-notch service journalism and in-depth consumer advice to our readers, enabling them to make well-informed decisions when it comes to their finances. Each tax guide we produce is the result of thorough reporting by our team of expert writers and editors, who possess extensive knowledge of tax software products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently, without any input from our commercial team or external third parties. We uphold the highest journalistic standards and ethics in everything we do.

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