Short Answer 
A W-2 is a vital document from employers that summarizes earnings and taxes withheld, aiding in accurate tax filing. Key details to review include total earnings, federal and state taxes withheld, Social Security and Medicare contributions, retirement contributions, and health insurance deductions. Use this information carefully when filing taxes to ensure accuracy and avoid audits.
Step 1: Understand the Purpose of a W-2
A W-2 is a crucial document issued by employers that summarizes your earnings and the taxes withheld from your paycheck. Its primary purpose is to assist you in accurately filing your federal, state, and local taxes. It ensures that you report your income and taxes correctly to the IRS and relevant tax authorities.
Step 2: Review Key Information on the W-2
Your W-2 contains essential details that impact your tax filing. Here’s what to look for:
- Earnings: Total income received during the year.
- Federal Tax Withheld: Amount deducted for federal income tax.
- State Tax Withheld: Amount deducted for state income tax.
- Social Security Tax Withheld: Contribution towards Social Security.
- Medicare Tax Withheld: Contribution towards Medicare.
- Retirement Contributions: Amount invested in retirement plans.
- Health Insurance Deductions: Amount paid towards health insurance.
Step 3: Use the W-2 for Tax Filing
When it comes time to file your income taxes, use the information provided in your W-2 to report your earnings and tax payments. The amounts listed will help you determine if you owe additional taxes or are entitled to a refund. Make sure to double-check these figures to avoid any discrepancies that could trigger an audit.