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Guide · Your situation

I'm a W-2 employee

If you work for an employer, your taxes mostly happen in the background: tax comes out of every paycheck, and at the end of the year your employer sends a Form W-2 summing it all up. This guide explains what's on that form, why you got a refund or owed money, and what you can adjust for next year.

Written for the 2025 tax year (returns filed in 2026). Grab your W-2 and last year's return and follow along.

Reading your W-2, box by box

You don't need every box. These are the ones that matter most.

Box 1 · WagesYour pay that's subject to federal income tax. It's often lower than your total salary because things like 401(k) contributions and some health insurance premiums come out first.
Box 2 · Federal tax withheldThe federal income tax already taken from your paychecks. This is the main number that decides your refund or balance due.
Boxes 3–6 · Social Security & MedicareWages and taxes for Social Security and Medicare (often called FICA). These are separate from income tax and usually aren't refunded.
Box 7 · Social Security tipsTips you reported to your employer. For 2025, this box can help tipped workers figure the new tips deduction.
Box 12 · Coded itemsLetters with amounts, like retirement plan contributions, HSA contributions from your employer, or the cost of your health coverage (shown for information only). The W-2 instructions explain each code.
Box 14 · OtherA catch-all your employer can use for extra information. For 2025, some employers will list overtime pay here.
Boxes 15–20 · State & localWages and tax withheld for your state and city. You'll use these on your state return.

Why you got a refund or owed

Your withholding is an estimate made during the year, using the Form W-4 you gave your employer. Your return is the real math at the end. If too much was withheld, you get a refund; if too little, you owe. Common reasons for a surprise: a second job, a raise or bonus, a life change like marriage or a child, or a W-4 that hasn't been updated in years.

Ask yourself: Compare Box 2 on your W-2 to the total tax on your Form 1040. How far apart were they, and what changed this year?

Your W-4: the dial you control

The Form W-4 tells your employer how much to withhold. You can submit a new one anytime. It asks about your filing status, other jobs, dependents and any extra withholding you want. The IRS has a free Tax Withholding Estimator on irs.gov that walks you through it using your paystub.

Ask yourself: When did I last fill out a W-4? Has my life or income changed since then?

Workplace benefits that lower your taxes

Many employers offer accounts where money comes out of your pay before income tax, which lowers Box 1. Common examples are a traditional 401(k) or 403(b), a health savings account (HSA) if you have a qualifying high-deductible health plan, and flexible spending accounts (FSAs) for medical or dependent care costs. Each has its own rules and yearly limits.

Ask yourself: Which of these does my employer offer? Am I using them, and does my employer match retirement contributions?
New for 2025

Tips and overtime deductions

For tax years 2025 through 2028, some workers can deduct qualified tips and the extra "half" portion of qualified overtime pay on the new Schedule 1-A. Eligibility rules and income limits apply.

2025 is a transition year, so your W-2 won't have a dedicated box for these amounts. Tipped workers can look at Box 7 or their own tip reports to their employer. For overtime, some employers will list it in Box 14 or give a separate statement; if yours doesn't, ask payroll or check your paystubs. Starting with 2026 W-2s, these amounts get their own codes.

Ask yourself: Do I earn tips or overtime? Do I have records showing how much?

What you could look at next year

  • If your refund or balance surprised you, run the IRS Tax Withholding Estimator and consider a new W-4.
  • Review your workplace benefits during open enrollment, especially retirement plans and HSAs or FSAs.
  • If you have a second job or side income, account for it on your W-4 or with estimated payments.
  • If you earn tips or overtime, keep records of the amounts all year.
  • Keep your paystubs and W-2s together in one place, so filing is easier.
  • Bring your questions to a qualified tax professional before you make big changes.

Sources

Last updated: November 14, 2026

This page was written from the sources below. Official sources are from the IRS or another government body; secondary sources are tax publications used to cross-check new rules. Tax law changes, so always confirm with the official source for the year you're filing.