NEW TO FILING TAX RETURNS?

It’s the end of the year and you have just completed your very first year of work and come end of January, you received your first W-2 in the mail and you are scared and nervous. You know it is something you are obligated to do, but you’ve heard so many things that could go wrong if you are filing your tax returns yourself. Penalties, interest, garnishments!

There is no need to fear, you just need to take a deep breath and organize yourself. When it comes to filing your taxes, you have to keep a few things in mind. First, they are not due immediately, you have until April 15th to file them, but I would caution against waiting that long, especially since this is your first time ever filing taxes. Second, have all the paperwork you need when visiting a tax preparation office. The tax office will usually have a checklist of items needed to bring into the office or if you decide to tackle your taxes yourself virtually, you will probably need the same items from the checklist for office visits. If you have worked two or three different jobs during the previous year, you will receive a W-2 from each job.

Before deciding on an office or virtual tax site, shop around. Research tax offices near you to get an idea of the cost of having your taxes prepared by them.

WHAT DOES THIS W-2 MEAN?

Here, I will briefly explain what the boxes on your W-2 means. Some W-2s may look slightly different, but they will all have key information that is required from your employer and the IRS. Your W-2 may also include a summary statement regarding your wages, tips and other compensation, social security and medicare wages, state wages, tips, etc. You will also see benefits you received such as 401(k), insurance information, health savings account contributions (HSA), and your name and address may all be part of this summary statement.

Boxes A-F

You will see Boxes A through F will be information pertaining mostly to your employer, with Box A pertaining to you. So, starting with Box A you will see your social security number. The entire nine digits may be displayed or most likely, it will display only the last four digits of your social security number. Box B your employer’s FED ID number or it may be called (EIN) Employer Identification Number. Box C your employer’s address appears here. Box D employer’s control number, if any, appears here. Box E & F will contain your address and zip code.

Boxes 1-20

Starting with Box 1, it should show the amount of wages earned and received from that job (wages, tips, other compensation).

Box 2, shows the amount your employer withheld on your behalf. If you were self-employed, you would have to set aside an amount to pay later in the form of estimated taxes (federal income tax withheld).

Box 3, is the amount of social security wages made.

Box 4, shows the amount of social security tax withheld from box 3.

Box 5, is medicare wages and tips earned. (All tips are reported here)

Box 6, will show the amount of medicare tax withheld from box 5.

NOTE: The amounts in boxes 1, 3, and 5 may be the same, but box 1 may be different in you participate in 401(K) or other plans. This information should be explained in your W-2 summary statement.

Box 7, if you have a job where you will receive tips, such as waiter or waitress in a restaurant, this box will show the amount you reported to your employer (social security tips).

Box 8, allocated tips will show how much your employer set aside for you in tips.

Box 9, should be grayed out since it is not in use at this time.

Box 10, this box will indicate how much your employer paid to your child care provider while you worked. If you did not use child care, this box will be blank (dependent care benefits).

Box 11, Nonqualified plans is a type of retirement savings plan that will let you defer income tax in a later year. If you participated, the amount will be shown here, but this box will most likely be blank.

Box 12 series: a single-letter or double-letter code from a listing that will correspond to certain benefits that the employee participated in and the amount. For example:

12a: D 2545.10

12b: W 350.00

12c: DD 1350.75

12d: (this box might be blank, for example)

Boxes 12a through 12d all may be blank, or maybe only one box has an amount in it.

Box 13, if you receive any here there will be three small boxes indicating the following:

• Statutory employee (insurance sales person)

• Retirement plan (if you receive employer sponsored plan like 401(K) from 12 series above, there will be an ‘X’ or check mark here).

• Third-party sick pay (this will be through an insurance company)

Box 14, Other; this box is used to report other tax information such as, state disability insurance tax withheld (SDI), paid family leave, union dues, etc.

Box 15, your two-initial state abbreviation and nine-digit Employer’s State ID number.

Box 16, amount of state wages, tips, etc. Should be same amount as box 1.

Box 17, amount of state income tax withheld from box 16.

Box 18, indicates how much was of local wages (like city or county taxes), tips, etc., was earned. This amount should be same as box 1.

Box 19, shows amount of local income tax was withheld from box 18.

Box 20, locality name will have the name of the city where you pay taxes.

If you live in a state where taxes are not withheld, box 17 will be empty. If the city you live in does not withhold taxes, boxes 18, 19, and 20 should be empty. If you need help with your tax return contact a tax professional.