Box 2: Federal income tax withheld. Box 2 reports the total amount withheld from your paychecks for federal income taxes. This represents the amount of federal taxes you have paid-in throughout the year.
Box 3: Social Security wages. Box 3 reports the total amount of wages subject to the Social Security tax. For 2012, the Social Security tax is assessed on wages up to $110,100. This limit is called the Social Security wage base. If Box 3 shows an amount over the wage base, you will need to have your employer correct your W-2. Tips reported to your employer are not included in the Box 3 amount. Those tips are is reported in Box 7.
Box 4: Social Security tax withheld. Box 4 reports the total amount of Social Security taxes withheld from your paychecks. Normally, the Social Security tax is a flat tax rate of 6.2% on your wage income, up to a maximum wage base of $110,100 (for 2012). However for 2012 only, the Social Security tax rate for employees was reduced to 4.2%. Wages above the wage base are not subject to the Social Security tax. Accordingly, the maximum figure shown in Box 4 should be $4,624.20 ($110,100 maximum wage base times 4.2%).
If you have two or more jobs during the year, and your total wages exceed $110,100, you may have paid-in more Social Security tax than is required. You claim the excess Social Security tax withholding as a credit on your Form 1040.
Box 5: Medicare wages and tips. Box 5 reports the amount of wages subject to Medicare taxes. There is no maximum wage base for Medicare taxes. The amount shown in Box 5 may be larger than the amount shown in Box 1. Medicare wages includes any deferred compensation, 401(k) contributions, or other fringe benefits that are normally excluded from the regular income tax. In other words, the amount in Box 5 typically represents your entire compensation from your job.
Box 6: Medicare tax withheld. Box 6 reports the amount of taxes withheld from your paycheck for the Medicare tax. The Medicare tax is a flat tax rate of 1.45% of your total Medicare wages.
Box 7: Social Security tips. Box 7 reports the amount of tip income that you reported to your employer. If you did not report tips to your employer, you will not have an amount in this box. The amounts in Box 7 and Box 3 should add up to the amount in Box 1, or the $110,100 maximum wage limit for Social Security taxes.
Box 8: Allocated tips. Box 8 reports any tip income that your employer thinks you may have earned. This amount is not included in the wages reported in Boxes 1, 3, 5, or 7. Instead, you must add this to your taxable wages on Form 1040 Line 7, and must calculate your Social Security and Medicare taxes on this tip income using IRS Form 4137 (PDF). Taxpayers with any amount shown in Box 8, Allocated Tips, should seek the advice of a tax preparer to figure out the best strategy for handling this situation. Employees with allocated tips must file Form 1040.
Box 9: No longer used. Box 9 was used to report any advance of the Earned Income Credit. The advance earned income credit ended in 2010, and Box 9 is shaded on the 2011 and 2012 versions of Form W-2. Advance EIC payments were advance payments from an employer to an employee in anticipation of being eligible for the earned income credit.
Box 10: Dependent Care Benefits. Box 10 reports any amounts reimbursed for dependent care expenses, or the dollar value of dependent care services provided by your employer. Amounts under $5,000 are non-taxable benefits. Any amount over $5,000 is reported as taxable wages in Boxes 1, 3, and 5. Dependent care benefits are reported on IRS Form 2441 (PDF).
More about Form W-2:
