W-2.
In plain English
Form W-2 is an IRS document your employer is required to send you (and the IRS) by January 31 each year. It reports your wages, federal and state income tax withheld, Social Security and Medicare withholdings, retirement plan contributions, and certain other compensation items. You use it to file your federal and state income tax returns.
01Why it matters
You can't accurately file your taxes without it (or a corrected version, if there's an error). The W-2 is also the record of how much you contributed to retirement plans, paid in payroll taxes, and earned in fringe benefits. Several boxes report different versions of your wages because different taxes use different rules. That's by design, not an error.
02The math, step by step
Your salary is $80,000 and you contributed $6,000 pre-tax to a 401(k). Your W-2 will likely show: Box 1 (federal taxable wages) ≈ $74,000; Box 3 (Social Security wages) ≈ $80,000; Box 5 (Medicare wages) = $80,000. Box 12 will have a 'D' code with $6,000 next to it, indicating the 401(k) contribution.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
A W-2 is for employees. A 1099 is for independent contractors, freelancers, and certain investment income. Employees get W-2s; the employer pre-pays half of the Social Security and Medicare tax on their behalf. Contractors get 1099s and pay both halves themselves through quarterly estimated taxes.
Plain-English answers from our glossary. Receipts included. Never advice.
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