money Taxes 2020: Everything you need to know about your W-2
You may have already gotten it in the mail, or, perhaps electronically from your paycheck provider. It’s your Form W-2, one of the most important forms that full-time and part-time employees need to fill out their tax returns accurately.
Known as the Wage and Tax Statement, a W-2 is a tax document that shows the total taxable wages you earned during the year along with the amounts withheld for federal and state taxes, Social Security, and Medicare. Other information, such as employee benefits, are also reported on your W-2.
Your employer must mail out or electronically send your W-2 by Jan. 31. If you don’t get it, talk to your payroll department. Your company may have the wrong address on file for you.
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W-2: Box by box
Anyone who had permanent employment last year – rather than a contract or freelance position – won’t be able to start their tax returns without a W-2. Some information is only informational, while other figures will be used on your returns. Here’s the information you’ll need at tax time.
Box 1 shows your taxable wages you earned from your employer during the year. Box 2 is the amount withheld for federal income taxes. In some cases, you may need to report box 5 – total amount of wages subject to the Medicare tax – on a Form 8959. Read the 1040 instructions to see if it applies to you.
Box 8 shows the total amount of tips you received, as recorded by your employer. If you kept a good record of your tips during the year, you can report your tip total rather than what’s in box 8. If your records are spotty, stick with the box 8 figure.
If your employer helped pay for your child care as a benefit, that figure will be in box 10. If it exceeds $5,000, then it’s taxable.
Box 12 shows other employee benefits you received during the year. For instance, a code D in box 12 shows the amount of 401k contributions you made during the year. A code W indicates the amount your employer contributed to your health savings account. Definitions of each code can be found on the back of your W-2.
What if there is a mistake on your W-2?
It’s smart to compare your W-2 with your final paystub of the tax year to make sure the numbers match up, said Logan Allec, a certified public accountant, adding: “Especially smaller employers doing payroll themselves,” he said. “Mistakes can be made.”
One common mistake is missing or misreported state and local tax laws – found in boxes 17 and 19 –especially if you live in one state but work in another. If this is your work situation, you should receive W-2s allocated to each state.
If you find or suspect an error on your W-2, ask your employer to issue a new, corrected one.
“It’s easier to fix a W2 than amend your tax return later,” Allec said.
Last, double-check the numbers you put on tax return match the ones that appear on your W-2. The Internal Revenue Service also receives a copy of your W-2 and expects your returns to be reported the same way. If not, you may get a letter from the IRS and delay a tax refund if you’re owed one.
The IRS officially starts processing tax returns on Monday, Jan. 27.
Janna is an editor for Yahoo Finance. Follow her on Twitter @JannaHerron.
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