A W-2 is the form your employer sends you after the year ends — by January 31 — reporting how much you earned and how much tax was already taken out of your paychecks. You use it to file your tax return. The same form goes to the IRS and your state, so the numbers on your return have to match it.
Every box on the W-2 answers one question: how much did you make, and how much tax is already paid in your name? Most of the boxes are for specific taxes and benefits. A handful do almost all the work.
The boxes that matter
Box 1 is your taxable wages — the number your federal income tax is figured on. Box 2 is the federal income tax already withheld from your checks all year. Boxes 3 and 5 show wages counted for Social Security and Medicare, and Boxes 4 and 6 show those taxes withheld. Near the bottom, Boxes 16 and 17 do the same job for your state. Box 12 is a catch-all with letter codes for things like retirement contributions and health coverage.
Why Box 1 is not your salary
This trips up almost everyone. Money you put into a traditional 401(k) and premiums for health insurance taken out pre-tax lower your taxable wages. So Box 1 is often thousands less than what you actually earned — and that is correct, not a mistake.
You earned $52,000 last year. You put $2,000 into your 401(k) and paid $1,500 toward health insurance from your checks. Your Box 1 wages show $48,500 — your gross pay minus those two pre-tax items. Box 2 might show $4,100 of federal tax withheld. When you file, the IRS compares what you owe on that $48,500 against the $4,100 already paid, and the difference is your refund — or your bill.
What to do with it
File it with your return — one copy is marked for the federal filing, another for the state. Then keep your copy. Mortgage lenders and landlords ask for W-2s because they prove income better than almost anything else.