How to read a W-2, box by box

Every January, millions of people stare at a W-2 and recognise almost none of it. It looks dense, but it’s logical — each box reports one specific thing, and once you know the important ones, the whole form reads clearly. Here’s a box-by-box tour of the parts that matter. (Box numbers and codes are standard but confirm current specifics; not tax advice.)

The wage and tax boxes (1–6)

• Box 1 — Wages, tips, other compensation. Your federally taxable wages — the number your tax return starts from.
• Box 2 — Federal income tax withheld. What was withheld for federal income tax over the year.
• Box 3 — Social Security wages and Box 4 — Social Security tax withheld. Wages subject to Social Security (capped at the annual wage base) and the tax on them.
• Box 5 — Medicare wages and Box 6 — Medicare tax withheld. Wages subject to Medicare (no cap) and the tax.

Why Box 1 often differs from Boxes 3 and 5

This puzzles everyone. Box 1 is frequently lower than Boxes 3 and 5 — and that’s correct. The reason is pre-tax deductions: a traditional 401(k) reduces Box 1 (income-tax wages) but is still subject to FICA, so it stays in Boxes 3 and 5. A Section 125 health premium reduces all three. So the gaps between the boxes are a map of your pre-tax deductions.

Box 12 — the coded box

Box 12 uses letter codes for specific items — a 401(k) contribution, the cost of employer health coverage, and others. Each code has a meaning; the common ones are worth recognising because they explain the box differences above.

Box 13 and the state boxes (15–20)

Box 13 has checkboxes (retirement-plan participation, statutory employee). Boxes 15–20 report state and local wages and taxes — the state equivalent of Boxes 1 and 2.

It should tie to your last pay stub

Your final pay stub of the year carries year-to-date totals that should reconcile to the W-2 — the YTD gross, taxes and deductions line up with the boxes. If they don’t, that’s worth questioning. It’s the same audit trail described in reading a pay stub.