How To Read Your W-2

January 31, 2014 | Kate Horrell

W-2 Wage and Tax Statements are out for 2013, and you may be wondering what all those numbers really mean.  Let’s see if I can help.  (Click on the image to make it bigger.)

W-2 without identifying information

 

First, the lettered blocks: There, you should find your Social Security Number and unit information.

The numbered blocks are the important information.

Box 1 Wages, tips and other compensation

This box shows all your taxable income. If you have tax-exempt income, it will not be included in this figure.

Box 2 Federal income tax withheld

This box shows the total amount you had withheld for payment of federal income taxes.

Box 3 Social Security wages

This is the amount of your income that is subject to Social Security Taxes.   For most people, this will be the amount in Box 1 plus the amount in Box 12, Code Q (if any).   Income earned in combat zone tax exclusion areas are included in this amount.  You are only taxed on the first $113,700 of income each year, so if your income exceeds $113,700, then this box will only say $113,700.

Box 4 Social Security tax withheld

This amount shows how much Social Security tax you’ve had withheld during the year.  It should be equal to 6.2% of your Social Security wages shown in Box 3.

Box 5 Medicare wages

This is the amount of your income that is subject to Medicare tax.  This should equal the amount listed in Box 1 plus the amount listed in Box 12, Code Q (if any.)  Income earned combat zone tax exclusion areas are included in this amount.

Box 6 Medicare tax withheld

This amount shows how much Medicare tax you’ve had withheld during the year.  It should be equal to 1.45% of your Medicare wages shown in Box 5.

Box 12

This box lists a wide variety of important figures with codes next to them for identification. The most frequently seen codes on military W-2s are AA, D, and Q.

Code AA represents Roth TSP contributions. The AA will have a number next to it that designates the tax year for which the contributions were made.

Code D represents traditional TSP contributions. It can also have a year code.

Code Q indicates income that was earned in a combat zone tax exclusion area. You may elect to use this amount for inclusion in calculations for certain tax credits such as the Earned Income Credit.

Box 14

Box 14 also shows miscellaneous important figures.  The most frequently seen code on military W-2s is code E

Code E represents traditional TSP contributions made with income earned in combat zone tax exclusion areas.

Boxes 15 through 20 include similar information for state and local taxes.

My smart accounting-type friend recommends that you check these numbers against your records, as sometimes they are wrong. You can not correct your own W-2. You have to ask the issuer to correct it.

I hope this helps make the W-2 a little easier to understand.  If you have questions, please ask in the comments and then I can improve this explanation.

Happy tax filing!

Comments

  1. ILYA says:

    GREAT HELP, THANKS!

  2. Kathy says:

    Shouldn't the difference on the W2 in box 1 & 3= the amount in box 12, Code Q? Nothing is in box 7,8,9,10, or 14.

    • Kate says:

      Kathy, military members should not have any numbers in boxes 7, 8, 9 or 10. Militayr members usually only have an amount in box 14 if they contributed tax exempt income to a traditional (non-Roth) TSP account.

      In most cases, you are correct: Box 3 (Social Security Wages) should equal Box 1 (taxable wages) plus any non-taxable income. For military members, the most frequent non-taxable income is income earned a combat zone tax exempt area, and that would be reported in box 12 with a Q code. There are, however, a variety of issues where those numbers won't add up. For example, there is a cap on Social Security taxes. Once you've reached that income level, no more tax is collected. For 2013, box 3 would never have an amount higher than 113,700. Other issues can have the same effect.

      Does that make sense?

  3. Floyd C. Denney says:

    I need a w2 for 2013

    • Kate says:

      Mr. Denney, military W-2s can be accessed via the Defense Finance and Accounting Service (DFAS) MyPay Website. I hope that helps!

  4. Cher says:

    Why is the amount on the DFAS W-2 in the Social Security wages box 5 not the gross amount. If the salary is 110000 why does Box 5 show only 105,000? Shouldn't the entire amount be taxed? Thanks for the info.

    • guest says:

      Depends on what your salary actually was 117k is the max SS taxable limit. So any part of your salary above 117k would be exempt from SS taxation, hence the difference

      • Cher says:

        The salary is under 117k so all should be taxed. But only part is taxed. That's why I don't understand why there is a lower amount in Box 5 and where that number came from. thanks,

        • guest says:

          I'd check with your finance office, it could have to do with a number of things, for example if you were in a combat zone for a portion, if part of your compensation package includes non taxable benefits, if they front paid you 5k of this years salary last year etc. It could also be a mistake. Sit down with finance and see what they say.

    • Bethany says:

      My husband's Social Security wages are less than the total because a some of his pay this year was a bonus. The bonus was taxable for federal and state taxes but not for Social Security and Medicare.

  5. guest says:

    What does K mean in box 14? This isn't explained anywhere.

  6. Bethany says:

    K is "Pretax vision and dental deduction." It's on the back of the W-2. If you get your W-2 from MyPay, you have to click on "Copy B and C Backs" to find it.

  7. Zach says:

    If I was in a combat zone all of 2014 then there would be a 0$ in box 1, correct?

  8. Patrick says:

    I'm confused as to why my W-2 has a "Q" line in Box 12, indicating "nontaxable combat pay" when I was not deployed in 2014. Was this made in error by my finance department?

    • Bethany says:

      Did you take any leave in 2014 that was earned while you were in a combat zone? Those days are non-taxable as well.

  9. John says:

    I have military w2 with an amount in box 1 and withholding in box2. The "retirement plan" box is checked. Nothing else in the w2. What is it?

    • Josh says:

      I have the same exact thing, and am wondering what to do? I never signed up for a retirement plan but I just recently separated after 3 years. Wondering if I can take that money out?

      • Kate says:

        Josh, the retirement plan indicated on your W-2 is the military pension system. There is no money in it, because it is a defined benefit plan, which has no cash value.

  10. Irene says:

    Filling out tax return for my son and am confused with the TSP amounts. W2 Block 12 shows $488 for code D (traditional TSP) and $3000 for code AA (Roth TSP). But TSP statement shows Traditional contribution for 2014 is $868 and for Roth $2750.
    (1) Which is correct for tax return and why the difference? He did have some code Q combat pay. Would that account for the difference?
    (2) On the IRA contributions worksheet, is the correct number $868 or $0? My son doesn't have any IRAs separate from the TSP account.

  11. Tax Preparer says:

    I have a customer's W-2 for 2014 from the NAVY/MILITARY. Under Box 12, he has Code "D 14 $xxxx.xxx." I entered "D" and it brings up Yr. I drilled down under "YR" and the highest year listed is 2013. If I click on 2013, it gives me 13, if I click on 2010, it gives me 10, etc.

    Question 1. Why is there no corresponding 2014 in the Tax Program which will allow me to enter the code 14?

    Question 2. If I do not enter the "14", will this have a negative effect on the Tax return (I do not think so, but I need a another opinion).

    • Kate says:

      Tax Preparer, if I am understanding your question correctly, it sounds like your software is out of date. Depending on how your software is programmed, using the wrong year could very definitely have a negative effect on your client's return. Traditional TSP contributions are deductible for the year in which they were made. If you designate the wrong year, it may not properly calculate the return.

  12. James says:

    Hi Kate, I have questions.
    On my 2014 W-2, in box 14 I have a code "v" which indicates some type of non-taxable health benefits amount. If so, what type of health benefit is it? Is my tax professional supposed to add or subtract this amount in my tax return? Or, is it just there for informational purposes?
    The reason I'm asking is my health care through my employer isn't automatically deducted from paycheck, we pay it via check monthly. Is this amount possibly tax-deferred or tax free?
    BTW I'm an Army civilian.

    • Kate says:

      James, I have absolutely no knowledge about DoD civilian health care benefits and how it applies to taxes. I would expect your tax professional to have this knowledge. I'm sorry that I can't help.

  13. Brendan says:

    Why is the block 12 code D amount on my W2 different than the amounts on my annual TSP statement?

    • Kate says:

      Brendan, did you spend any time in a Combat Zone Tax Exempt (CZTE) area, or were any of your TSP contributions to a Roth TSP?

  14. Bethany says:

    Brendan, I've noticed that the LES and W-2 report contributions based on when they are deducted but the TSP statements report based on when the transaction is completed. For example, my husband's December 2014 TSP deduction was not processed until Jan 2, so it was not included on the 2014 annual statement. Because of this, the amount on the W-2 and the TSP statement don't match.

  15. Alex says:

    Hey Kate, quick question.
    Box 20 on my W2 is blank, but for PA local taxes that box is required to be filled out. Im not sure what i am supposed to put in that box. I get a "prompt" on my screen that says if box 20 is blank, then put the count where i worked. What should i put if i was deployed?

    • Kate says:

      I'm not sure what software or online program you are using. It sounds as if you did not have local taxes withheld from your military pay, perhaps because of your location in a Combat Zone Tax Exempt (CZTE) area. I am not familiar enough with Pennsylvania tax law to comment on this particular situation. I suggest you seek tax advice from your base legal office or the Military One Source tax consultants. You may also find help from a legal office located on a base in Pennsylvania, such as Carlisle Barracks or Mechanicsburg.

      Good luck to you.

  16. Sherrie says:

    I have a ? also for the box 14 I have E14 with a dollar amount. The alert comes up and says I might not need to report this could be for informational purposes. I'm confused and not sure what to do.