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W-2 Form
Definition
A tax form issued by employers showing annual wages and taxes withheld.
Explanation
Employers send W-2 forms to employees and the IRS each January showing total compensation, federal income tax withheld, Social Security tax, Medicare tax, and other deductions. You use the W-2 to file your annual tax return.
The W-2 also reports state and local tax withholdings and retirement plan contributions. Keep your W-2s for at least 3-7 years for tax record purposes.
Example
Your employer sends you a W-2 showing $50,000 salary and $7,500 federal tax withheld, $3,100 Social Security, and $725 Medicare.