W-2 Preparation Guide: Box-by-Box Instructions for Accurate Filing
6/16/2026
Most Form W-2 errors are not box-level mistakes. They are upstream errors — a deduction mapped to the wrong tax base in March, imputed income never captured, a manual check issued outside the system — that the W-2 reports faithfully.
That means preparing a W-2 correctly is mostly a matter of knowing what each box should contain so you can recognize when it does not. This guide goes box by box with that purpose.
Before You Start: Reconcile
Do not prepare Forms W-2 from the system's output without reconciling. Tie all four Forms 941 to the totals that will appear on the Form W-3, and resolve any variance first. Filing and correcting later means amended Forms 941 plus Forms W-2c, which is several times the work.
See our year-end reconciliation guide and the Payroll Year End: W-2 And Proper Year End Reconciliation session.
The Identification Boxes
Box a — Employee's Social Security number. Verify against Social Security Administration records before filing. A name/SSN mismatch generates a notice and potential penalties. Never enter a truncated or masked number on the copy filed with the SSA; truncation is permitted only on the employee copies.
Box b — Employer identification number. The EIN under which the wages were actually reported on the Forms 941. If you have multiple EINs, wages must follow the EIN that paid them.
Box c — Employer name and address.
Box d — Control number. Optional, for the employer's own tracking.
Boxes e and f — Employee name and address. The name must match the Social Security card, which means no nicknames and no unreported name changes. Suffixes and hyphenated names are frequent mismatch sources.
The Wage Boxes
This is where understanding matters most, because these three boxes legitimately differ from each other.
Box 1 — Wages, tips, and other compensation. Federal income tax wages. Includes regular wages, overtime, bonuses, commissions, taxable fringe benefits and imputed income, non-accountable reimbursements, and taxable moving expenses. Reduced by traditional 401(k) and similar pre-tax retirement deferrals, Section 125 cafeteria plan contributions, and other income-tax-only exclusions.
Box 3 — Social Security wages. Reduced by Section 125 contributions but not by traditional retirement deferrals. Capped at the annual taxable maximum — $184,500 for 2026. This box should never exceed that figure for any employee.
Box 5 — Medicare wages and tips. Same base as Box 3 but uncapped.
The relationship to expect for a retirement plan participant: Box 1 is lower than Boxes 3 and 5 by the amount of their traditional deferral. That is correct. Employees ask about it every January, and having a one-paragraph written explanation ready saves substantial time.
Box 2 — Federal income tax withheld. Total for the year, including withholding on supplemental payments.
Box 4 — Social Security tax withheld. Should equal Box 3 × 6.2%. Verify the arithmetic; a mismatch usually indicates a wage base error.
Box 6 — Medicare tax withheld. Box 5 × 1.45%, plus the additional 0.9% on wages above $200,000. So for a high earner, Box 6 will exceed 1.45% of Box 5, which is correct.
Box 7 — Social Security tips. Reported tips subject to Social Security. Boxes 3 and 7 combined should not exceed the annual taxable maximum.
Box 8 — Allocated tips. Tips allocated to the employee where reported tips fell below the applicable threshold. Not included in Boxes 1, 3, 5, or 7.
Boxes 9 Through 11
Box 9 — Currently unused.
Box 10 — Dependent care benefits. The total amount of dependent care assistance provided, including the value of employer-provided services. Amounts above the applicable exclusion limit — $7,500 for 2026, a substantial increase from the prior $5,000 — are also included in Boxes 1, 3, and 5 as taxable.
Box 11 — Nonqualified plans. Distributions from a nonqualified deferred compensation plan or a nongovernmental Section 457(b) plan. This box exists so the Social Security Administration can determine whether an amount was earned in a prior year, and it is frequently misused. Do not report deferrals here.
Box 12: The Codes
Box 12 carries lettered codes identifying specific amounts, most of which are already included in the wage boxes and are restated here informationally. Employees regularly misread these as additional charges.
The codes most commonly needed:
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Purpose
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What it reports
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Elective deferrals
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Traditional 401(k), 403(b), and similar pre-tax deferrals
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Roth contributions
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Designated Roth contributions to a 401(k) or 403(b)
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Group-term life over $50,000
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The Table I cost of the excess coverage — already in Boxes 1, 3, and 5
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Employer HSA contributions
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Employer contributions, including employee contributions made through a cafeteria plan
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Employer-sponsored health coverage cost
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Informational reporting of total coverage cost — not taxable
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Nontaxable sick pay
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Third-party sick pay not includible in income
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Uncollected Social Security or Medicare on group-term life
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For former employees
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Nonqualified deferred compensation
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Amounts under Section 409A
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Because codes are added and revised, work from the current-year instructions rather than a remembered list. Our payroll forms update session tracks form revisions.
New for 2026: under the One Big Beautiful Bill Act, qualified tips and qualified overtime compensation must be separately reported, using dedicated Box 12 codes, with a tipped occupation code where applicable. Only the premium portion of overtime mandated by Section 7 of the FLSA qualifies — not voluntary overtime, not state-law-only premiums, and not overtime-style bonuses. These amounts remain fully taxable and subject to FICA; the deduction is claimed by the individual. See OBBBA payroll forms update.
Boxes 13 Through 20
Box 13 — Checkboxes. Three of them:
- Statutory employee — a narrow category; check only where it genuinely applies
- Retirement plan — check if the employee was an active participant in a qualified plan at any time during the year, which includes participants who received only an employer contribution. This box affects the employee's IRA deduction eligibility, and it is frequently left unchecked in error.
- Third-party sick pay — check where a third party paid sick pay reported on this form
Box 14 — Other. A free-form box for information the employer wishes to convey — state disability insurance withheld, union dues, after-tax contributions, educational assistance, or amounts required by a state. Nothing here is standardized federally, so label entries clearly.
Boxes 15 through 20 — State and local. State abbreviation and employer state ID, state wages, state income tax withheld, local wages, local income tax withheld, and locality name.
Two points that generate corrections:
Multi-state employees need multiple lines. An employee who worked in two states during the year gets an entry for each, with wages allocated appropriately — not the full annual wage repeated for both.
State wages frequently differ from Box 1. States do not always conform to federal treatment of pre-tax deductions, so a non-conforming state's wage figure may legitimately be higher. See our multi-state payroll tax guide.
Filing Mechanics
Deadline: January 31 for both furnishing employee copies and filing with the Social Security Administration. Unlike some information returns, there is no later deadline for the government copy.
Electronic filing is required at a low return threshold, which has been reduced substantially in recent years and now captures most employers. Aggregation rules apply across form types, so an employer filing modest numbers of several different information returns may be required to e-file all of them. Confirm the current threshold rather than assuming a paper option exists.
Form W-3 is the transmittal summarizing all Forms W-2 for the EIN. Its totals must equal the sum of the individual forms and should tie to the four Forms 941.
Employee delivery. Paper delivery is always permissible. Electronic delivery requires the employee's affirmative consent, notice of the right to a paper copy, and instructions for withdrawing consent.
Penalties apply per form for late filing, failure to file, and incorrect information, with higher amounts for intentional disregard and reductions for prompt correction. Because the penalty is per form, an error affecting the whole population scales quickly.
A Pre-Filing Review
- [ ] All four Forms 941 tie to the Form W-3 totals
- [ ] No employee's Box 3 exceeds the annual Social Security taxable maximum
- [ ] Box 4 equals Box 3 × 6.2% for every employee
- [ ] Box 6 equals Box 5 × 1.45%, plus 0.9% on wages above $200,000
- [ ] Box 1 is lower than Box 3 for retirement plan participants by their deferral amount
- [ ] All imputed income is included in the wage boxes, not only in the general ledger
- [ ] Group-term life over $50,000 appears in both the wage boxes and Box 12
- [ ] The retirement plan checkbox is set for every active participant
- [ ] Third-party sick pay is reported by the correct party, once
- [ ] Names match Social Security records exactly
- [ ] Multi-state employees have separate state lines with allocated wages
- [ ] Qualified tips and qualified overtime are separately reported for 2026
- [ ] E-filing threshold and credentials confirmed
Special Populations
Most Forms W-2 are routine. These populations are not, and each has an error pattern worth knowing.
Terminated employees. They still receive a Form W-2 for the year in which they were paid, and their address is the most likely to be stale. Solicit updates in October, and expect undeliverable mail regardless. Note that a Form W-2 is required even for someone who worked a single day.
Deceased employees. Wages paid after death in the same calendar year are generally subject to FICA but not to federal income tax withholding, and are reported differently from ordinary wages. Wages paid in a later year are generally exempt from FICA as well. Amounts paid to a beneficiary or estate may require a Form 1099-MISC rather than a Form W-2. See handling complex payroll payments.
Employees with two work states. Separate state lines with allocated wages, and state figures that may legitimately differ from Box 1 in non-conforming states.
Employees who reached the Social Security wage base. Box 3 should equal the taxable maximum exactly, and Box 4 should equal 6.2% of it. A figure a few dollars over is a wage base configuration error.
High earners above $200,000. Box 6 will exceed 1.45% of Box 5 because of the additional 0.9%. Verify the additional withholding started in the correct period rather than at year end.
Employees who received only imputed income. A former employee with continuing group-term life coverage may have a Form W-2 with wage amounts and no cash wages, and therefore nothing from which to withhold. This requires the uncollected-tax Box 12 codes.
Employees with third-party sick pay. The Box 13 checkbox must be checked on the reporting form, and the reporting party must be established in advance. See third-party sick pay reporting.
Statutory employees. A narrow category with its own Box 13 checkbox and its own reporting consequences — check it only where it genuinely applies, since it changes how the recipient reports the income.
Employees paid under multiple EINs. Wages follow the EIN that paid them, which means separate Forms W-2 rather than a combined one.
Frequently Asked Questions
Why are Box 1 and Box 3 different on a W-2?
Because they measure different tax bases. Box 1 is federal income tax wages, reduced by both Section 125 cafeteria plan contributions and traditional retirement deferrals. Box 3 is Social Security wages, reduced by Section 125 but not by retirement deferrals, and capped at the annual taxable maximum. For any employee making traditional 401(k) deferrals, Box 1 should be lower than Box 3 by the deferral amount — that is correct, not an error.
What is the deadline for filing W-2 forms?
January 31 for both furnishing copies to employees and filing with the Social Security Administration. There is no later deadline for the government copy. Electronic filing is required at a low return threshold that now captures most employers, with aggregation rules applying across information return types.
What goes in Box 12 of a W-2?
Lettered codes identifying specific amounts — elective retirement deferrals, Roth contributions, the cost of group-term life coverage over $50,000, employer HSA contributions, the cost of employer-sponsored health coverage, and nonqualified deferred compensation, among others. Most restate amounts already included in the wage boxes and are informational. Beginning with 2026, qualified tips and qualified overtime compensation are also reported here.
When should the retirement plan box be checked on a W-2?
Whenever the employee was an active participant in a qualified retirement plan at any time during the year — including employees who made no deferrals but received an employer contribution. The box affects the employee's IRA deduction eligibility, which is why leaving it unchecked in error has consequences for them, and it is one of the more commonly missed items.
How do you report an employee who worked in two states?
With separate state lines in Boxes 15 through 20, one for each state, with wages allocated between them based on where the work was performed. Repeating the full annual wage figure for both states is a common error. Note also that state wage amounts may legitimately differ from Box 1, because states do not always conform to federal treatment of pre-tax deductions.
What is new on the W-2 for 2026?
Qualified tips and qualified overtime compensation must be separately reported using dedicated Box 12 codes, with a tipped occupation code where applicable, under the One Big Beautiful Bill Act. Only the premium portion of overtime mandated by Section 7 of the FLSA qualifies. Both amounts remain fully taxable and subject to Social Security and Medicare — the deduction is claimed by the individual on their return.
Going Deeper
Form W-2 boxes, Box 12 codes, and the electronic filing threshold are revised periodically. Work from the current-year IRS instructions rather than a prior year's form or a remembered code list.
