When you receive your W-2 form from your employer, it contains important information about your income, taxes withheld, and other benefits for the tax year. Box 2 of the form shows the total federal income tax withheld from your paycheck. This amount should be included in the federal income tax withholding line on your return (Form 1040, line 25a). Box 3 of the W-2 form shows the salaries of your employees subject to Social Security tax, which may be different from what is indicated in box 1.This is the total federal income tax withheld from your salary during the year.
The total in box 3 must not exceed the maximum social security salary base for that tax year. Social security salaries are reduced for health insurance premiums, travel benefits, and some contributions to the flexible spending program. Social security salaries are not affected by deferred compensation or contributions. Wages subject to Medicare tax are the same as those subject to social security tax in box 3, except that there is no base salary limit for the Medicare tax. Your W-2 wage and tax return details your total annual salary and the amount of tax withheld from your paycheck. Your contributions shown in Box 14 are not subject to federal income tax, but are subject to FICA (Social Security and Medicare), state and local taxes.
When you prepare your returns and calculate your taxes for the year, the withholding amount your employer reports on Form W-2 is subtracted from your tax bill. DeCAP contributions are subject to New York State and City taxes and must be added back to Box 1 when filing New York State and City tax returns. Box 13 indicates if you worked as a statutory employee and were not subject to federal income tax withholding, participated in an employer-sponsored retirement plan, such as a 401 (k) or 403 (b) plan, or received sick compensation through an outside source, such as an insurance policy. When your employer withholds amounts from your paycheck for income taxes, those amounts are remitted to the IRS and other tax authorities throughout the year. Employers (W) withhold money from your salary and send it to various tax agencies throughout the tax year on your behalf. This can help you avoid having to make a tax payment with your tax return and can reduce or eliminate penalties for underpaying your estimated tax.
This amount is subject to state and municipal taxes and must be added back to the taxable wages in Box 1 when you file your taxes. But most importantly, since the IRS receives a copy of your W-2 form, you already know that you're likely to have reportable income and can contact you if you don't file a tax return. Your employer uses boxes 15 through 20 to report state and local income tax information with the two-letter abbreviation of your state name along with your employer's state identification number assigned by the state. Both Form W-2 and Form 1099 are intended to report the income you earned from sources throughout the tax year.