What the form is
Form W-2, the Wage and Tax Statement, is the employer's report of what it paid you and what it withheld during the year. One copy goes to the Social Security Administration, which shares it with the IRS; your copies go on your federal and state returns. The IRS General Instructions for Forms W-2 and W-3 define what belongs in each box, and because the employer fills it in from payroll records, the form is only as right as the payroll was. Reading it is mostly a matter of knowing which wages each box counts.
The boxes
| Box | Name | What it reports (IRS instructions) | Where it goes or what to check |
|---|---|---|---|
| 1 | Wages, tips, other compensation | total taxable wages, tips and other compensation for the year; pre-tax elective deferrals are left out | Form 1040, the wages line |
| 2 | Federal income tax withheld | the total federal income tax withheld from your wages | Form 1040, payments |
| 3 | Social Security wages | total wages, before payroll deductions, subject to employee Social Security tax, up to the wage base | check against box 4 |
| 4 | Social Security tax withheld | the employee share only, including tax on tips | 6.2 percent of box 3 |
| 5 | Medicare wages and tips | total Medicare wages and tips, with no wage base limit | check against box 6 |
| 6 | Medicare tax withheld | the employee share, including any Additional Medicare Tax | 1.45 percent of box 5, plus 0.9 percent above $200,000 |
| 10 | Dependent care benefits | benefits under a dependent care assistance program | Form 2441 |
| 12 | Coded amounts | up to four lettered codes with amounts; the common ones are below | depends on the code |
| 13 | Checkboxes | statutory employee; retirement plan (active participant in the year); third-party sick pay | the retirement plan box affects IRA deductibility |
| 14 | Other | free-form items the employer wants to give you: state disability tax, union dues, uniform payments and the like | informational |
| 15 to 20 | State and local | state abbreviation and employer state ID, state wages and tax, local wages, tax and locality name, for up to two states and two localities | the state return |
Boxes 7 and 8 cover Social Security tips and allocated tips, and box 11 nonqualified plan distributions; most employees see them blank. Boxes a to f on the left carry your Social Security number, the employer's EIN, and both names and addresses, which should match your records exactly.
Three kinds of wages
The form reports three different wage totals because three taxes define wages differently:
box 3 = Social Security wages, deferrals included, capped at the wage base ($184,500 for 2026)
box 5 = Medicare wages, deferrals included, no cap
The IRS instructions tell the employer to show total taxable wages in box 1 and total wages before payroll deductions subject to Social Security tax in box 3. A 401(k) deferral is not taxable wages for income tax, so it leaves box 1; it is still subject to Social Security and Medicare tax, so it stays in boxes 3 and 5, and it appears again in box 12 with code D so you can see where it went. Boxes 3 and 5 are therefore usually equal to or larger than box 1, and box 3 falls below box 5 only for earnings above the wage base.
One salary, worked into the form
An employee earns $70,000 and defers $5,000 into a traditional 401(k) during 2026, with no other pre-tax items:
| Box | Amount | How |
|---|---|---|
| 1 Wages, tips, other compensation | $65,000 | $70,000 − $5,000 deferral |
| 3 Social Security wages | $70,000 | $70,000, under the $184,500 base |
| 4 Social Security tax withheld | $4,340 | 6.2% of box 3 |
| 5 Medicare wages and tips | $70,000 | $70,000, no cap |
| 6 Medicare tax withheld | $1,015 | 1.45% of box 5 |
| 12 | D $5,000 | the 401(k) deferral |
| 13 | Retirement plan ☑ | active participant in the plan |
Box 2, the federal income tax withheld, depends on the employee's Form W-4 and is not computable from the salary alone; the guide how to fill out Form W-4 explains what sets it, and the paycheck calculator estimates it per paycheck. Multiply box 4 by the employer's matching share and the employer paid the same again, which is the part of payroll tax an employee never sees.
The box 12 codes
| Code | Meaning |
|---|---|
| D | elective deferrals to a 401(k) plan |
| E | elective deferrals to a 403(b) plan |
| AA | designated Roth contributions to a 401(k) plan |
| W | employer contributions to a health savings account, including amounts you contributed through a cafeteria plan |
| DD | cost of employer-sponsored health coverage; the IRS says this amount is not taxable |
| C | taxable cost of group-term life insurance over $50,000 |
Code DD is the one that alarms people: a large number labelled as health coverage. The IRS instructions say the amount reported with code DD is not taxable; it is the cost of the coverage, employer and employee shares together, reported for information. Code W is the opposite case: an HSA amount that reduces taxable wages and that you must reconcile on Form 8889, which the guide HSA vs FSA covers along with the 2026 limits.
What to check before filing
- Name and Social Security number against your card; the IRS matches returns to the employer's copy by number.
- Box 1 against your last pay stub's year-to-date taxable wages, and box 2 against the year-to-date federal withholding.
- Box 4 equals 6.2 percent of box 3 and box 6 at least 1.45 percent of box 5. If not, something was withheld wrongly and the employer owes a correction.
- Box 12 codes against what you elected: the 401(k) deferral, the HSA amount, the Roth contribution.
- Boxes 15 to 20 for the right state, and for both states if you moved.
A wrong W-2 is fixed by the employer with Form W-2c, not by the employee on the return. This guide follows the IRS instructions for the form; the employer's payroll department is the place to ask about a specific entry, and the guide W-2 vs 1099 covers what changes when income arrives on the other form instead.
Frequently asked questions
Why is box 1 on my W-2 lower than box 3 and box 5?
Because box 1 is taxable wages for income tax and leaves out pre-tax elective deferrals such as a 401(k) contribution, while boxes 3 and 5 are Social Security and Medicare wages, which include them. The IRS instructions tell the employer to show total taxable wages in box 1 and total wages before payroll deductions subject to Social Security tax in box 3. The deferral itself appears in box 12 with code D.
What do the codes in box 12 mean?
Each is a lettered amount defined in the IRS instructions. The common ones: D is 401(k) elective deferrals, E is 403(b) deferrals, AA is Roth 401(k) contributions, W is employer HSA contributions including your own through a cafeteria plan, DD is the cost of employer-sponsored health coverage, which the IRS says is not taxable and is reported for information, and C is the taxable cost of group-term life insurance over $50,000.
Why is box 3 capped but box 5 is not?
Social Security tax applies to wages up to a yearly wage base, $184,500 for 2026, so box 3 stops there; Medicare tax has no wage base, so box 5 shows all Medicare wages. An employee earning above the base has a box 3 below box 5, and box 4 equals 6.2 percent of box 3 while box 6 is 1.45 percent of box 5 plus the 0.9 percent Additional Medicare Tax on wages over $200,000.
What is the retirement plan box in box 13 for?
The employer checks it if you were an active participant in a qualifying retirement plan for any part of the year. It matters beyond the W-2 because being covered by a plan at work is what limits the deduction for a traditional IRA contribution at higher incomes; the guide 401(k) vs IRA vs Roth IRA has the 2026 income ranges.
When do I get my W-2, and what if it is wrong?
Employers must furnish Forms W-2 by January 31 for the previous year, with the exact date in the year's instructions when the 31st falls on a weekend. If a box is wrong, ask the employer for a corrected form, a W-2c, before filing; the IRS matches the return against the copy the employer sent to the Social Security Administration, and a mismatch delays a refund.
Sources
- IRS General Instructions for Forms W-2 and W-3 (what each box reports: box 1 taxable wages, box 2 withholding, boxes 3 to 6 Social Security and Medicare wages and taxes, box 10 dependent care, box 12 codes including D, E, AA, W, DD and C, box 13 checkboxes, box 14 other, boxes 15 to 20 state and local; furnishing deadline)
- IRS Topic no. 751: Social Security and Medicare withholding rates (6.2 percent and 1.45 percent, the 2026 wage base of $184,500, the 0.9 percent Additional Medicare Tax above $200,000)