What can you learn from your W-2, Wage and Tax Statement?

 

[January 10, 2025]  Have you received a Wage and Tax Statement for 2024? When you earn money ($600 or more) from an employer, you should receive a Form W-2, Wage and Tax Statement, that shows your taxable income and the taxes withheld from the previous year. The Internal Revenue Service (IRS) provides a new Form W-2 template annually. Employers have until January 31 to file and distribute W-2s. If your W-2 is mailed as a paper copy, the postmark date should be no later than January 31 and received no later than early February. Some employers may offer online access to your W-2 if you give consent.

The IRS Form W-2 is used for calculating both federal and state income tax due. The information from the Form W-2 is needed when filing tax returns with the IRS in April. The Form W-2 should provide your taxable income (wages, tips, other compensation) and the taxes withheld for federal income tax, state income tax, social security tax, and Medicare tax. If the wages, tips, other compensation amount seems lower than you expected, you may have some nontaxable income items such as health insurance coverage or qualified pre-tax retirement contributions.

Verify the taxpayer information on your Form W-2 for accuracy. The employee's social security number, employee name, and address should all be up to date. If your information is incorrect, contact your employer about making the needed changes. Learn more from the IRS about what to do if your Form W-2 is incorrect or not received. A copy of your Form W-2 should be kept for your personal records. Financial records should be kept in a safe place. Unfortunately, tax-related identity theft does happen. Learn more about what to do if you suspect fraud from the IRS Identity Theft Guide for Individuals.

Understanding your income and taxes can be helpful with financial planning. Before making a spending plan, you need to know how much income you expect. A beginning step in financial planning is anticipating how much take-home pay you will earn. The amount of taxes withheld may be more or less than how much you actually owe for state and federal income taxes, so you may want to change or review how much is withheld on your Form W-4, Employee's Withholding Certificate. Use the information from your Form W-2, Wage and Tax Statement to start or review your financial plan for the year.

[Jamie Mahlandt,
Consumer and Family Economics Educator,
University of Illinois Extension]