If you’re filing your taxes for the first time this year, a good place to start is to just relax. Millions of Americans, like you, go through this same cycle every year. Once you get one filing season under your belt, I’m sure that the rest of them will be second nature and more of a burden than the fascinating, new experience it was this year.
Before you file your taxes, you must have W-2s from every employer you worked with last year. The W-2, or “Wage and Tax Statement,” is a very simple form. It basically states who you worked for, how much you made, how much federal and state tax was deducted from your salary, and how much of your paycheck went to things such as health insurance, a 401(k) retirement plan, or union dues, to use a few examples.
When you look at your W-2, the information presented is all simply and cleverly labeled. From Box 1, “Wages, tips, other compensation” to Box 17, “State income tax,” it is not very difficult to find the information you’re looking for. Some of the more important boxes you’ll use on your tax return are 1, 2, 12, and 14-17. You’ll use 1 and 2 on your federal tax return to report your income; wages are reported on the upper half of the return under “Income” and federal tax withheld is reported towards the bottom under “Taxes.” (If you would like to know specifically where to report this information, check the instructions for your specific tax form: 1040, 1040A, or 1040EZ. Being a first-time filer, you’ll more than likely have enough of a simple financial situation to use a 1040EZ, the simplest of tax forms.)
I mention Box 12 for individuals who participate in an employer-sponsored retirement program. If you have a 401(k) or other retirement plan at work, you’ll see a “D” or “E” in this box next to an amount. This is how much you contributed from your paycheck to the retirement plan. Be sure to match up the letter shown with the instructions on the back of the W-2. In most situations, if you contributed to a retirement plan at work you can receive a credit for this amount by filing Form 8880 . Review this form carefully because you just might qualify for it.
Box 14 is also important because it lists other amounts deducted from your paycheck such as union dues and health insurance premiums. If you are filing Form 1040 this year, you may be able to include these amounts on your return by filing Schedule A . Check the instructions included with this form for details .
Boxes 15-17 list all of the information that you’ll need to file your state tax return. If you state has an income tax, your state’s abbreviation will be listed in Box 15 (i.e. “NE” for Nebraska). Box 16 is similar to box 1, only this figure is the amount of wages that you employer reported to your state of residence. The next box to the right, 17, shows how much state income tax was deducted from your paycheck throughout the year. You will report this information on your state tax return as well.
Hopefully this has provided you with a short primer on the all-encompassing W-2. As always, if you have a question about the information reported on your W-2 or dispute these amounts, first contact your employer. With just a little bit of research and your first tax season successfully completed, you’ll feel much more confident filing your income taxes next year. I wish you the best of luck!
1. “Form 8880, Credit for Qualified Retirement Savings Contributions,” Internal Revenue Service (http://www.irs.gov/pub/irs-pdf/f8880.pdf).
2. “Schedule A-Itemized Deductions,” Internal Revenue Service (http://www.irs.gov/pub/irs-pdf/f1040sab.pdf).
3. “2006 Instructions for Schedules A & B (Form 1040),” Internal Revenue Service (http://www.irs.gov/pub/irs-pdf/i1040sa.pdf).