Taxes withheld on W2 provide enough information to employees about how much tax in total was withheld from their income. Form W2 not only provides the taxes withheld from the employee’s income when processing payroll but the total amount of income paid as well.
These two alone is enough for many taxpayers to file a federal income tax return. While the total wage, salary, and other compensation paid to employees including tips can be found on Box 1, there is more to taxes withheld.
Here is where you can find the taxes withheld on 2021 Form W2.
Box 2: Federal Income Tax Withheld
Box 17: State Income Tax Withheld
Box 19: Local Income Tax Withheld
While these can be used to file a tax return, Form W2 reports more than just these taxes. On Boxes 4 and 6, you can see the total amount of Social Security and Medicare taxes withheld.
As far as the income reported on Form W2 goes, you can find the total income subject to the above FICA taxes. These can be found in Boxes 3 and 5, respectively.
What to do with this information?
The taxes withheld reported on Form W2—Wage and Tax Statement can be used for figuring out whether or not you’re going to owe in taxes. If you’re planning on filing a tax extension, you can use the taxes withheld as a reference point to your tax liability. If the taxes withheld in total is more than the estimated amount owed to the IRS, you don’t need to pay when filing an extension.
It’s also possible to estimate the taxes withheld during the course of the tax year before the tax year ends. For this, you can use the IRS tax withholding estimator. It will give you an idea about the total amount of taxes withheld from your income before your employer files a Form W2.
Although it will give you an estimate of the total taxes withheld, you can divide it by your pay frequency to see compare with the actual taxes withheld. This will give you an idea about the accuracy of the estimation. Learn more about how to estimate taxes from here.