The most important tax form you’ll get this year


Tax season is fast approaching, and those expecting big refunds are scrambling to prepare their returns. But before you can expect to file an accurate tax return, there’s a form almost everyone will need to get – and thankfully, it should arrive by the end of January.

Anyone who was an employee should receive Form W-2 from their employer. There you will find essential tax information that you will need to complete your income tax return. In particular, with information on both income and taxes withheld from your paychecks during the year, anyone expecting a refund will rely on getting their W-2 early in order to calculate how much. the IRS owes him.

Below, we’ll take a close look at what you’ll find on the W-2 Form and how you can use it in your tax preparation.

Image source: IRS.

Boxes a to f: Information about you and your employer

Most of the left side of Form W-2 is for providing personal information about you and your employer. You will see your social security number, name and address, as well as your employer’s tax identification number and address. If you find any discrepancies in this information, it is important to address them quickly to avoid potential red flags to the IRS.

Boxes 1, 3 and 5: Salaries, tips and other remuneration

These three boxes present different measures of your taxable salary. Box 1 is the most important number for federal income tax purposes because it contains the amount that typically appears on your return and includes adjustments for various tax breaks. Boxes 3 and 5 reflect the fact that taxable wages for Social Security and Medicare purposes may be different, as not all tax breaks that reduce taxable income for income tax purposes are ‘do not apply to social security and health insurance payroll taxes.

Boxes 2, 4 and 6: Tax deductions

These three boxes reflect the amounts withdrawn from your paychecks during the year. Box 2 shows the total amount withheld for federal income tax, which you will include on your Form 1040 and use to determine the amount of any refund you will get. Box 4 reflects the Social Security payroll tax rate of 6.2%, while Box 6 shows the corresponding rate of 1.45% for Medicare withholding tax. These two payroll tax numbers are generally not important for income tax purposes, although some who hold multiple jobs and earn more than the Social Security maximum limit may use them to apply for a. additional reimbursement.

Boxes 7 and 8: Tips

Tipping has special rules, as those who work for businesses where tips are common, such as restaurants or taxi companies, must report the income from the tips to their employer. Box 7 includes tips actually paid, while box 8 applies if your employer has many employees and automatically awards you an amount of tips.

Boxes 10 and 11: Dependents’ benefits and distributions from ineligible plans

If you receive Dependent Assistance Benefits from your employer or make flexible contributions to an expense account, they will be reflected in box 10. If you received distributions from non-qualifying pension plans from your employer in 2019, they will appear in box 11.

Boxes 12 and 14: Details of tax breaks and other information

Boxes 12 and 14 contain additional information, much of which often refers to tax-beneficial items such as income excluded from health insurance benefits. This list of IRS codes will help you understand exactly what your employer is saying in Box 12. Some of these items may be needed for your return, while others are just for information. In addition, box 14 is there to help you with information not covered by the list of codes in box 12.

Box 13: Special status

Those who qualify as statutory employees, participate in a pension scheme, or are eligible for third-party sickness benefit may see one or more of these boxes checked in Box 13. These special statuses may have additional statuses. impacts on your tax calculations, so it’s important to know them.

Boxes 15 to 20: National and local tax information

State and local tax laws may differ from federal law, so the numbers in boxes 15 through 20 will not always be the same as the corresponding boxes earlier on the form. In general, however, you should be able to determine where they are coming from based on federal numbers and the specific provisions that apply in your state or locality.

Worth the wait

It is theoretically possible to prepare your taxes without your W-2, if you can find the information that will appear there by other means. However, since the deadline for your employer to give you your W-2 is January 31, it’s easier to wait and make sure you have the correct numbers when you return.

Source link

Comments are closed.