After discussing the basics of W2 preparation, now let’s move on to explore the Form W2 itself. The many boxes and codes can be confusing for bookkeepers and tax preparers alike, so we hope to clarify this for you.

The Form’s Identifiers

Form W2 requires accuracy and thoroughness in its completion. Bookkeepers must make sure that all applicable boxes are completed as necessary.

First, payer information should be entered correctly and must match the IRS records associated with that EIN. When names and EIN’s don’t match, employers face delays in processing, as well as potential penalties.

The next section requires that the individual employee’s SSN and name be entered and should be as it appears on their SSN card. Names and SSN’s that don’t match also cause delays and possible penalties for the employer as well. Remember to enter the employee’s address next.

The Form’s Boxes 1 through 11

Employers must ensure that all applicable boxes for each of their employees is completed correctly, and that no boxes requiring information are incomplete.

Box 1 requires that the total taxable compensation for Federal income tax purposes be reported here. This includes wages, tips and other compensation, as well as certain fringe benefits, such as HRA (Health Reimbursement Arrangement) reimbursements under a qualified HRA plan.

However, certain fringe benefits that qualify as pre-tax or tax-deferred are not included in Box 1. These might include such items as 401K contributions or qualified Section 125 cafeteria-plan insurance premiums paid. Generally speaking, this box total should match the totals of all four quarters of Line 2 of the Form 941 filed during the year.

Box 2 reports the total Federal Income Taxes withheld from this employee’s wages.

Box 3 and Box 5 are typically the same and report the total taxable Social Security and Medicare wages for this employee. However, if certain items, such as Tips, are involved, these amounts may be different. Although the amounts in these boxes can also be the same as Box 1, under various circumstances, they may not. Bookkeepers must know exactly which forms of compensation belong in which box and ensure that the amounts are reconciled with quarterly and annual payroll tax return filings.

Box 4 and Box 6 report the amounts withheld for the employee’s portion of Social Security taxes and Medicare taxes, respectively. The employer’s portion of Social Security and Medicare taxes is not reported on the W2, but has been reported on the Forms 941 or Form 944.

Box 7 and Box 8 require the reporting of any applicable tips, for employees who have received tips as a part of their compensation.

Amounts paid for an employee’s dependent care benefits are reported in Box 10. Some employers assist their employees with benefits for the care of young children so the employee can work. Any employer amounts for such are be reported here.

Box 11 shows any non qualified plan amounts applicable to this employee.

Next in this series, let’s examine the remaining boxes of Form W2 and discuss the many different ways these may apply.