Art: My name is Art Auerbach, I’m tax director with Goodman and Company. I’ve over 40 years of experience, and this segment is gonna be on what to do, or how to use your W2 form in your tax preparation.
Male: How and when do I use a W2?
Art: The W2 is only if, obviously, if you are a wage earner, if you work somewhere for someone. Now, let’s back up a step, unfortunately there are people who are working for employers who are no longer in existence. The employer may have closed up shop for whatever reason, bankruptcy, moved, left. Have not sent you, you do not have your W2 form. There is an alternative procedure. If you have your last pay stub from that employer, there is a form that you can obtain from the IRS website. It’s a form in the 5000 series, it’s a substitute W2 form where you can take the numbers from your pay stub, insert it on this form and then follow the rules as if you had had your real W2. But unfortunately, that stumps a lot of tax payers out there when they know they work for an employer, the employer is nowhere to be found and I don’t have my W2 form, what do I do now? But there is a procedure out there as long as you have that last pay stub, so that you know what the numbers were from an accumulated amount up until you left that place of employment. In this segment, I’m gonna refer to specific boxes on the W2 form. Obviously check the W2 to make sure that your name is spelled correctly and they issued the W2 to your correct social security number. Because, if it’s somebody else’s social security number and you attach it to your return, that’s gonna show up as a mismatch at the Internal Revenue Service center and you’re gonna have a problem. The next question is gonna be on the W2, make sure it was from your employer, that somebody has not just sent you a W2 form that isn’t yours. Now we’re into the numbered boxes. Box 1 is your total taxable compensation. Box 1 goes to line 7 on form 1040, if you have more than one W2 form, add up all your W2s box 1, that total should go online 7 of the 1040. Box 2 on the W2 is your Federal income tax withheld, that’s how much what’s withheld from your pay, remitted to the federal government to cover your tax liability. That goes in under the credit section on page 2 of form 1040, there’s a line there that says Federal income tax withholding. If you have multiple W2 forms, add all of that box 2 together, put it in on one line on the back side of the form 1040. If you are gonna file a paper return, not going to electronically file, you must attach copies of your W2 form to the filing. If you efile, electronically file, obviously there’s no way to do that, so you have to make sure you copy the numbers correctly from the W2 form. Now, box 3 on the W2 form is the amount of social security wages that you have had during the year. The reminder here is there is a maximum for that box, for the year 2007, it was 97,500 dollars. If you have more than one W2 form, and box 3 totals more than 97,500 dollars, you have had an excess social security withheld so you look now at box 4. And you take the excess, once you reach 97, 5, that’s the maximum social security you should pay. Anything over that amount becomes a credit on your 1040 on page 2 in the 50 numbered lines in the credit section of form 1040. Box 5 is the medicare wages, that’s an unlimited amount that may be more than box 1, don’t worry about it, that’s on the basis on which your medicare tax that paid. The other important box to look at is box 10, you’ll see a whole bunch of code letters there, turn your W2 form over. On the back of the W2 is an explanation as to what all the lettered codes are. Some of the more common ones are the letter D, if you are on a 401K plan. That will show you the amount of 401K contribution that you have during the year for your employer. There might be a lettered item there if you had a child or dependent care plan at your employer. Look at that code letter, because that is gonna affect your ability to do the child care credit later on, on the tax return. So there’s a lot of information on the W2 form, you need the front part of the W2 and the back side of the W2 with the explanation as to what all of the codes are for. Now there’s one more box that I will reference on the W2 form, it’s box 13. That’s a little series of check boxes. There are three blank check boxes in there. One of them says are you an employee, or a type of employee, if that box is checked then your W2 form can go to line one on schedule C instead of line 7. But be very careful about that. Don’t move that unless that box is checked. Then there is another box there that says retirement plan. That is very important, if that box is blank, that means you were not covered by an employer’s retirement plan, you then have the ability to do an individual retirement account, and IRA, that’s deductable, so you wanna be careful. The term that I was searching for before is statutory employee, if that box is checked on your W2, then you can put that W2 form on the first line of schedule C, instead of line 7. Now the last portion of the W2 across the bottom generally, or maybe down the right hand side, depending upon which version your employer uses, will be the state information. It will be the state wages that were paid, most important is the amount of state tax withheld. That becomes a deduction for you on line 5 of schedule A of form 1040, the amount of state taxes withheld by your employer are state taxes that you are deem to have paid during the year, it then becomes an itemize deduction on schedule A of form 1040. Now finally, as I mentioned in the introduction, the last pay stub of the year will contain information on it, for which there is no box on the W2 form, and you need those numbers. The items there could be work related, union dues, work cloths, tools, uniforms, things of that nature. It might even be charitable contributions that you made through a payroll check off, so those items would be on your final pay stub. If you contributed towards your medical insurance where you work, that won't be on a W2. That will be on your pay stub, that’s a medical deduction on schedule A. So the W2, in conjunction with your final pay stub, very important in preparing your 1040.
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