What a W2 shows and why you need to understand it

Your W2 is a record of the wages your employer paid you and the taxes they withheld during the year. The form has 14 numbered boxes, and each one reports a different piece of that information. You need to read it correctly because you'll use these numbers on your tax return, and mistakes on your W2 can cost you money or trigger an audit.

The W2 arrives by January 31 each year for the previous calendar year. Your employer sends copies to you, to the IRS, and to your state tax agency. If you worked for multiple employers, you'll receive a separate W2 from each one. Before you file your taxes, check that the numbers match your pay stubs and your records — if something looks wrong, contact your employer's payroll department to request a corrected form.

Key Takeaways

  • Box 1 (wages, tips, other compensation) is the number you report as income on your tax return and is usually your gross pay minus pre-tax deductions like health insurance.
  • Boxes 2 and 6 show federal and state income tax withheld; if these are too low, you may owe money when you file; if too high, you'll receive a refund.
  • Box 5 (Medicare wages) and Box 3 (Social Security wages) may differ from Box 1 if you have certain pre-tax deductions, and they determine how much you paid into those programs.
  • Boxes 12 and 14 contain codes that identify special types of income or deductions, such as 401(k) contributions (code D) or dependent care (code D).
  • The top of the form shows your name, address, employer name, and employer ID number — verify these match your records and your employer's actual business.

Boxes 1 through 6: Income and tax withholding

Box 1 (Wages, tips, other compensation) is your taxable income for the year. This is almost always the number you enter on your tax return as wages. It includes your salary or hourly pay, bonuses, and tips. It does not include money you contributed to a traditional 401(k), health insurance premiums paid before taxes, or dependent care accounts — those are deducted before the number in Box 1 is calculated.

Box 2 (Federal income tax withheld) shows how much your employer sent to the IRS on your behalf throughout the year. When you file your tax return, the IRS compares this amount to what you actually owe. If Box 2 is higher than your tax bill, you get a refund. If it's lower, you owe the difference. This is why people with the same income can owe money or receive refunds — it depends on how much was withheld.

Box 3 (Social Security wages) and Box 5 (Medicare wages) show the income subject to Social Security and Medicare taxes. These are usually the same as Box 1, but they can differ if you have certain pre-tax deductions. For example, if you contributed to a traditional 401(k), that amount reduces Box 1 but not Boxes 3 and 5. The Social Security wage cap also affects Box 3 — in 2024, earnings above $168,600 are not subject to Social Security tax, so Box 3 may be lower than Box 1 if you earned more than that.

Box 4 (Social Security tax withheld) and Box 6 (Medicare tax withheld) show the payroll taxes your employer deducted. These are not refundable — they go into the Social Security and Medicare trust funds. You cannot reduce these amounts on your tax return. If you worked for multiple employers and earned over the Social Security wage cap, you may have overpaid Social Security tax, which you can claim back on your return.

Boxes 7 through 11: Additional taxes and state information

Box 7 (Social Security tips) appears only if you reported tips to your employer. This is separate from tips included in Box 1. Box 8 (Allocated tips) is used by large food and beverage employers to allocate tips among employees when the total tips reported are less than 8 percent of sales. Most workers will see zeros in these boxes.

Box 9 (Dependent care benefits) shows the value of dependent care benefits your employer provided, such as an on-site daycare or a dependent care account. This amount is not taxable income if it meets IRS rules, but it still appears on your W2 for record-keeping. Box 10 (Nonqualified plans) is used for distributions from nonqualified deferred compensation plans — most workers will not see an amount here.

Box 11 (Nonqualified plan distributions) shows distributions from a deferred compensation plan that became taxable in the current year. This is uncommon for most employees. Box 12 contains one or more codes and amounts that report special types of income or pre-tax deductions. The code tells you what the amount represents.

Box 12 codes: Understanding special income and deductions

Box 12 can have multiple entries, each with a letter code followed by a dollar amount. The code identifies what the amount is. Here are the most common ones you'll see:

Code D is a 401(k) contribution — money you deferred into your retirement plan. This reduces your taxable income in Box 1. Code E is a 403(b) contribution (used by schools and nonprofits). Code F is a 457(b) contribution (used by government employees). Code G is a 401(k) catch-up contribution if you're age 50 or older. Code H is a 403(b) catch-up contribution. Code S is a Simple IRA contribution.

Code DD shows the cost of employer-sponsored health insurance coverage. This is informational only and does not affect your taxes, but it's used to determine whether you're considered covered for the individual mandate. Code W is a pre-tax dependent care benefit. Code AA is a designated Roth 401(k) contribution. Code BB is a designated Roth 403(b) contribution. If you see a code you don't recognize, the IRS website has a full list, or you can ask your payroll department what it means.

Boxes 13 through 14: Retirement and other information

Box 13 has three checkboxes: "Statutory employee," "Retirement plan," and "Third-party sick pay." The "Retirement plan" box is checked if you're covered by your employer's retirement plan. This matters because it affects whether you can deduct an IRA contribution on your tax return. If this box is checked and your income is above a certain threshold, your IRA deduction phases out. The threshold depends on your filing status and changes each year.

Box 14 (Other) is a catch-all for information that doesn't fit in the other boxes. Common entries include state disability insurance, union dues, or other employer-specific deductions. The label next to the amount tells you what it is. Some of these amounts are deductible on your tax return; others are not. Check the label or ask your payroll department if you're unsure whether to report it.

Verifying your W2 against your pay stubs

Before you file your taxes, compare your W2 to your final pay stub from December. Add up all the amounts in Box 1 from each pay stub throughout the year — this should match Box 1 on your W2. Do the same for federal tax withheld (Box 2) and any other boxes that appear on your pay stubs. Small differences can happen due to rounding, but large gaps mean something is wrong.

Check that your name, address, and Social Security number are correct at the top of the form. Verify that your employer's name and Employer Identification Number (EIN) match your records. If you see an error, contact your employer's payroll or human resources department immediately. They can issue a corrected W2 (called a W2-c) and send it to the IRS and your state. Do not file your tax return until you have the correct form.

If your employer does not send you a W2 by February 15, or if you never received one from a past employer, you can contact the IRS at 1-800-829-1040 or use the IRS website to request a transcript of your wage and income record. This will show what the IRS has on file for you and can help you track down a missing W2.

Frequently Asked Questions

Why is my Box 1 amount different from my gross pay?

Box 1 is your taxable income after pre-tax deductions are subtracted. If you contribute to a traditional 401(k), health insurance, dependent care account, or other pre-tax benefit, those amounts reduce Box 1. Your gross pay (before any deductions) is higher. Check your pay stubs to see which deductions were taken out.

What should I do if my W2 has the wrong name or Social Security number?

Contact your employer's payroll department right away and ask them to issue a corrected W2. Do not file your tax return with an incorrect W2 — the IRS will match the information on your return to what they received from your employer, and mismatches can delay your refund or trigger an audit.

Do I need to report all the boxes on my W2 when I file my taxes?

No. You report Box 1 as your wages. Boxes 2 through 6 are used by the IRS to verify your withholding and calculate any refund or amount owed. Boxes 12 through 14 contain information that may or may not be reported depending on the code or type of income — your tax software or tax preparer will know which ones to include.

What if I worked for two employers and my Social Security tax was withheld twice?

If you worked for multiple employers and your combined wages exceeded the Social Security wage cap, you may have overpaid Social Security tax. You can claim the overpayment as a credit on your tax return. Your tax software will calculate this automatically when you enter both W2s.

Can I use my W2 to determine if I owe taxes or will get a refund?

Not exactly. Your W2 shows what was withheld, but your actual tax bill depends on your total income, deductions, credits, and filing status. You'll know whether you owe or get a refund when you complete your full tax return. However, if Box 2 (federal tax withheld) is much lower than your expected tax bill, you may owe money.