There has never been a more welcomed term in the adult taxpayer’s life, than the invention of the W-2 and January 31st; let’s take a moment to examine the W-2, and what it really means to the average taxpayer. What information is found on the W-2, how do we provide the information for the W-2 and who is responsible for providing the W-2?
There are 20 “boxes” of information found on the W-2, and all pertain to the varying forms of compensation you may have received as an employee. Boxes 1 thru 14 deal with employee compensation on a federal level; boxes 15-20 pertain to income and any state liability due. Wages, tips, and compensation, federal tax withheld, social security wages, social security tax withheld, and the information for Medicare all relate to your federal tax liability. Boxes 7 and 8 have to do with receiving tip income, and the amount of the income that is eligible for social security tax.
Boxes 9 and 10 are for earned income credit advance payments, and any form of dependent care benefits you may have received, that are taxable income. Boxes 11 -14 are for retirement plan income deductions; pre-tax contributions such as to 401(k)s, SEPs, IRAs, MSAs, and HSAs, would fall into this category, and any contributions made that are pre-tax contributions would be shown here.
Boxes 15-20 are for reporting earned income as it applies to your individual state, or the state in which you worked. Quite often, taxpayers reside in one state, and work in another. If this is the case, when you complete your tax return for the year, you will file a return for the state in which you reside, and the state in which you worked, as a non-resident filer.
When you receive your W-2, you normally receive 4 copies; one for your federal tax return, one for a state return, one for an additional state that may or may not be needed, and one for you to keep for your records.
There are additional boxes shown on the W-2 that are alphabetically identified, as a thru f. These boxes contain information about the recipient and the company issuing the W-2. Your social security number, your address, and your employee number if you’ve been assigned one. These boxes are also for your employer information, their federal identification number, their address, and telephone number is usually also listed.
What items may be included in your wages, tips, and compensation? Believe it or not, it can include more than just your income from your weekly check. Any benefits received as bonuses, prizes, awards, and noncash payments may be included in your wage and income information. If you receive payments from taxable benefits of a section 125 cafeteria plan, (if you choose cash payment) will be shown as wage income. Employer paid contributions for qualified long-term care services to the extent that the contributions are flexible and controlled in part by the employee are taxable. Employer paid child care services are also included as income to the employee.
When it comes to deferred payments, pre-tax and after tax contributions to a 401(k), an IRA, a ROTH IRA, or an HAS, some of the benefits and contributions made by your employer may or may not be included as taxable income, and must be included as other compensation. Quite often, income included in this manner won’t be subject to federal withholding, but will be subject to social security and Medicare taxes, so it there fore must be included for those taxes to be properly computed.
Currently, there is no cap on Medicare tax in relation to the level of income reported; with social security, the limit is the first $94,200 of earned income is taxable, anything above that amount, is not. It should also be noted here, that any advance EIC payments, or advance earned income payments should not be taxed with federal withholding, Medicare, or social security.
There are times when you need to go out of town and to another country for business reasons. This often happens if youre an executive or a high ranking official of an organization or company. If youre one of those important office personnel, you should make sure that you don’t travel without business travel insurance. More at Good Business Travel Insurance for a Worry-Free Trip
There are several major search engines that you can count on if you want to search for information regarding travel insurance. You can go to Google, Yahoo, MSN, and many others. Simply type the words travel insurance and you will be provided with a plethora of enriching information that you can use in your search for the right insurance provider. While youre still hunting for that one insurance provider who can meet all your insurance needs, check out AA Travel Insurance first. More at AA Travel Insurance for Your Insurance Needs
A tax (from the Latin taxo; “rate”) is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many administrative divisions. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent.
According to Black’s Law Dictionary, a tax is a “pecuniary burden laid upon individuals or property owners to support the government […] a payment exacted by legislative authority.” It “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority” and is “any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name.”
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