Box 2. Federal income tax withheld)

This is the amount of money the federal government withheld from your wages (Box 1). Box 3 and box 7 combine to make total Social Security wages if you were a tipped employee.

Box 3. Social security wages

This is the amount of money you made throughout the year that was subject to the Social Security tax. The Social Security tax rate is 6.2% of your paycheck. For 2017 tax year, taxable wage limit is $127,200. Read more here. The amount the federal government withheld is in Box 4. This box does not include tips.

Box 4. Social security tax withheld

This is the amount of your money taken out of your paycheck by the federal government that goes towards Social Security. If you multiply the amount in Box 3 by 0.062, you will get the number in Box 4. It shouldn’t be more than $7,886 for the 2017 tax year.

Box 5. Medicare wages and tips

This is the amount of your income subject to Medicare taxes. There is no wage limit on the amount of your income that can be subject to the Medicare tax, like there is for Social Security taxes. For employees that make over $200,000, there is an additional 0.9% tax on top of the 1.45% tax rate. Learn more here.

Box 6. Medicare tax withheld

This is the amount of tax taken out of your paycheck by the federal government that goes toward Medicare. It’s 1.45% of your income from Box 1.

Box 7. Social security tips

This is the amount of tips you reported to your employer throughout the year, that are subject to Social Security withholdings. If you also receive an hourly wage, that amount will be in Box 1 for wages. This amount is NOT included in Box 1.

Box 8. Allocated tips

This Box shows the amount of allocated tips you received during the year. What is an “allocated” tip? Generally they are tips from credit cards rather than cash that your employer received and divided up between all the staff. It could be that if you worked as a server at an event, and the client paid the venue for the service, then the venue would divide the amount for each employee.

This amount would be separate from regular tips in Box 7 or any hourly or salary wages you received in Box 1. This amount is NOT included in Box 1 or Box 8, or Box 3 or Box 5. So you may need to complete Form 4137 (Social Security and Medicare Tax on Unreported Tip Income) so you can pay Social Security and Medicare taxes on allocated tips.

Box 9. Verification code

Box 9 is new for the 2018 tax filing season. It’s a new initiative to help fight tax-related identify theft and refund fraud, according to the IRS. The codes are provided by certain payroll service providers, not by the IRS. A 16-character code (made up of numbers (0-9) and letters (A-F)) may appear in Box 9 of your W-2. The format looks like this: XXXX-XXXX-XXXX-XXXX.

The code is meant to verify W-2 forms e-filed by individuals (not on paper-filed returns). If you do not have a verification code – that’s ok – you may have a blank Box 9, or no Box 9 at all. The IRS says that an incorrect or omitted code should not delay or void your tax return. So if you have a code, enter it when prompted. XcelHR does not currently use this box.

Box 10. Dependent care benefits

If you receive dependent care benefits from your employer under a qualified plan, and they meet certain requirements, you can exclude them from your income. Dependent care benefits could include childcare/daycare or contributions to a flexible spending account.

Generally, it refers to a Section 125 plan where you take pre-tax dollars from your paycheck and put it towards paying for benefits premiums, etc. You can exclude up to $5,000 of dependent care benefits so they are not included in your taxable income. Amounts over $5,000 are included/includable in Box 1, 3, and 5.

Box 11. Nonqualified plans

This box shows the amounts that have been distributed to you from your employer’s non-qualified deferred compensation plan. It could be a retirement plan or some other agreement between you and your employer to pay you (the employee) compensation in the future. It is taxable and is included in Box 1.

Box 12.

There are many letter code variations you might in this box. The codes represent your contributions to different kinds of retirement plans, health plans/health reimbursements, adoption benefits, etc. The letters go from A to Z (with the exception of I, O, U, and X), and include AA, BB, CC, DD, EE, and FF. You’ll see a code in the left of the box, with the amount taxed/contributed for that code on the right side. You can find a list of what each code means here.

Box 13. Statutory employees – Retirement plan –
Third-party sick pay

Your employer may check none, or multiple, of these boxes depending on whether or not they apply to you.

• Statutory Employee - an employee who did not have federal taxes withheld from their paychecks during the year, such as an independent contractor or an employee who makes income solely on commissions.
• Retirement plan – you were a participant in your employer’s 401k plan, even if you might not have contributed money to the plan.
• Third-party sick pay – you received payments for sick time from another company, other than your employer (maybe an insurance company). Those wages most likely are not included in your wages on your W-2.

Box 14. Other

Employers can put whatever information they want here. If there isn’t a Box for the information on the W-2 they want to include, your employer may enter it here. Generally it’s something like educational assistance programs, travel reimbursement, or union dues. If they use an abbreviation or code you are unfamiliar with, your best bet is to contact your employer directly for clarification.