About the Author
J. Steven Tucker
J. Steven Tucker is a Certified Public Accountant. He has had his own CPA practice in Winston Salem NC since 1987. His areas of practice include financial planning as well as tax planning. Also, for several years now, he has been trading commodities.
As much as we may hate to admit it, the tax filing season is here. If your haven't already, you will soon be receiving a number of tax forms in the mail, such as W-2s and 1099s. To help make the tax filing process easier, in this next series of blogs I will be taking a look at the various tax forms that you will need in the process of preparing your 2006 tax return. In this blog, I will explain what those numbers in the various boxes on your W-2 form mean.
Obviously, your W-2 form is one of the most important forms you will use in the preparation of your tax return because it is this form that shows your taxable wages. Below, I will be explaining some of the numbers you will find in the various boxes on the W-2.
Box 1: This box lists your taxable wages and tips and other forms of taxable compensation. Taxable fringe benefits are also inclued in Box 1 and may also be shown in Box 14.
Box 2: This is the amount of federal income tax withheld from your pay.
Box 3: Wages subject to Social Security Withholding are shown in Box 3.
Box 4: Social Security taxes withheld from wages and tips are shown here.
Box 5: Wages subject to Medicare tax withholdings are shown here.
Box 6: The taxes withheld for Medicare are shown here.
Box 7: Tips reported to an employer are shown here.
The total of Boxes 3 and 7 should not exceed $94,200, which is the maximum Social Security wage base for 2006. There is no wage base limit for the Medicare taxes. Note that deferred compensation such as contributions to a 401(k) plan are subject to Social Security taxes and so are included in Boxes 3 and 5. However, deferred compensation is not included in Box 1, Taxable Wages.
Box 10: Reimbursements from your employer for dependent care expenses are shown here. Generally, amount of up to $5000 are tax-free, but you must file Form 2441 to get the exclusion.
Box 12: This box is an important box because it may show amounts for various items which will be coded. The codes indicate what the item is and also how the items will be treated tax-wise. For example, 401(k) plan deferral amounts are shown here and would be coded D. The "D" means tax-free deferral and that the deferral is not included in Box 1. Another example, qualifed moving expense reimbursements from an employer would be shown in Box 12 and coded with a P. The moving expense reimbursements are tax free but Form 3903 must be filed to get this exclusion.
Box 14: This box will show either taxable fringe benefits that are included in Box 1 or various deductions your employer took from your pay that you may deduct if you itemize deductions. Examples of these deductions would include union dues or contributions to United Way.
Boxes 17 and 19: These boxes show the amounts withheld for state and local taxes. These are the amounts you can use on Schedule A to deduct State and Local taxes if you itemize.
What I've gone over here are the most important and usually the most common numbers found on W-2 forms. To help make your tax filing easier, every day I'm posting tax filing tips on my website, www.mynetprofittools.com/taxtips.
Published by J. Steven Tucker on January 11, 2007 10:54 AM
