How to Read Your W-2: A Box-by-Box Guide, Box 12 Codes, and How It Differs From Japan’s Withholding Slip (2026)

If you work for a U.S. employer, your Form W-2 (Wage and Tax Statement) arrives around January. It is the starting point for your Form 1040, yet many people are puzzled when Box 1 is smaller than their salary, or when Box 12 shows letters like D and DD.

This guide walks through every box on the 2026 Form W-2, based on the IRS General Instructions for Forms W-2 and W-3 (2026), and compares the W-2 with Japan’s withholding slip, the 給与所得の源泉徴収票 (gensen choshuhyo). It is written for Japanese expatriates on assignment, locally hired Japanese employees, and green card holders.

Employers generally must furnish 2026 Forms W-2 by February 1, 2027. The 2026 form also has changes: new Box 12 codes TA, TP, and TT, and Box 14 is now split into 14a and 14b. Knowing how to read the form before it arrives makes tax season much easier.

Key points

• Box 1 is wages subject to federal income tax. Pre-tax 401(k) deferrals (Box 12, code D and similar) are excluded, so Box 1 is usually lower than your gross salary.
• Box 3 (Social Security wages) and Box 5 (Medicare wages) include pre-tax 401(k) deferrals. Box 3 is capped at $184,500 for 2026, so Boxes 1, 3, and 5 often differ.
• Box 2 is the federal income tax withheld during the year. Unlike the tax figure on a Japanese withholding slip, which reflects the employer’s year-end adjustment, it is not your final tax. You settle up on your own return.
• Box 12 uses letter codes to show specific items. Common ones are D (401(k)), W (HSA), and DD (cost of employer-sponsored health coverage, not taxable). Codes TA, TP, and TT are new for 2026.
• Boxes 15–20 report state and local income tax. Japan’s withholding slip has no line for resident tax (住民税), but the W-2 shows state and city income tax.

What the W-2 is and when it arrives

The W-2 summarizes the wages your employer paid you during the calendar year (January 1 to December 31) and the taxes it withheld. Your employer files the same information with the Social Security Administration (SSA), and Copy B states that the information is being furnished to the IRS.

Wages are reported in the year they are paid. The IRS gives this example: if an employee worked from December 13 through December 26, 2026, and was paid on January 1, 2027, those wages go on the 2027 Form W-2. Year-end paychecks and bonuses are reported by payment date, not by the period worked.

• Deadline: For 2026, employers generally must furnish Forms W-2 by February 1, 2027. A form that is properly addressed and mailed by the due date meets the requirement.
• If you left mid-year: The employer may give you your W-2 any time after employment ends, but no later than February 1, 2027. If you ask for it, the employer should provide it within 30 days of your request or of the final wage payment, whichever is later.
• More than one employer: If you changed jobs, you get a separate W-2 from each employer.
• Recordkeeping: Copy B is for your federal return and Copy C is for your records. The IRS says to keep Copy C for at least 3 years after your return’s due date, and suggests keeping it until you start receiving Social Security benefits.

Boxes a–f and Boxes 1–11

Here are the identification boxes (a–f) and the first group of dollar boxes (1–11).

Box	Label	What it shows
a	Employee’s social security number	Your SSN. It may show only the last four digits for your protection, but your employer reports the full number to the IRS and SSA.
b–f	EIN / Employer’s name… / Control number / Employee’s name, address	Your employer’s EIN, name, and address; an optional control number; and your name and address, which should match your Social Security card.
1	Wages, tips, other compensation	Pay subject to federal income tax, including bonuses, reported tips, and taxable fringe benefits. Excludes pre-tax 401(k) deferrals.
2	Federal income tax withheld	Total federal income tax withheld for the year.
3	Social security wages	Wages subject to Social Security tax, excluding tips. Boxes 3 and 7 together are capped at $184,500 for 2026.
4	Social security tax withheld	Employee Social Security tax at 6.2%. For 2026, no more than $11,439 per employer.
5	Medicare wages and tips	Wages and tips subject to Medicare tax. No cap.
6	Medicare tax withheld	1.45% Medicare tax plus 0.9% Additional Medicare Tax on Medicare wages above $200,000.
7	Social security tips	Tips you reported to your employer.
8	Allocated tips	Tips allocated by a large food or beverage employer; not in Boxes 1, 3, 5, or 7.
9	(no label)	An unlabeled box that is normally blank (made smaller on the 2026 form).
10	Dependent care benefits	Dependent care benefits; any amount over your employer’s plan limit is also in Box 1. See Form 2441.
11	Nonqualified plans	Nonqualified deferred compensation distributions; helps the SSA identify pay earned in earlier years.

Why Box 1 differs from Boxes 3 and 5

The most common surprise is that Boxes 1, 3, and 5 do not match. The main reasons:

• Pre-tax retirement deferrals: Deferrals shown in Box 12 with codes D, E, F, G, and S are left out of Box 1 but included in Boxes 3 and 5.
• Roth contributions: Designated Roth contributions (codes AA, BB, EE) are made after tax, so they are included in Boxes 1, 3, and 5.
• The Social Security wage base: Box 3 stops at $184,500 for 2026. Box 5 has no limit.
• Cafeteria plan (Section 125) deductions: A cafeteria plan lets you receive benefits such as health coverage on a pre-tax basis, and IRS Publication 15-B treats accident and health benefits as exempt from income tax withholding, Social Security tax, and Medicare tax. So if you pay health premiums pre-tax through a cafeteria plan, Boxes 1, 3, and 5 are usually all reduced. Employee HSA contributions made through a cafeteria plan are also left out of Box 3.
• Exemptions from Social Security and Medicare tax: Expatriates who gave their U.S. employer a certificate of coverage under the U.S.–Japan Social Security Agreement, and certain nonresident aliens in F-1 or J-1 status, may have no Social Security or Medicare tax withheld. Boxes 3 through 6 may then be blank or zero.

Worked example: how Boxes 1, 3, and 5 are figured

Example: hypothetical figures, assuming no other deductions or taxable fringe benefits.

Item	Case A	Case B
Gross salary	$120,000	$220,000
Pre-tax 401(k) deferral (Box 12, code D)	$15,000	$20,000
Health premiums through a cafeteria plan	$3,000	$0
Box 1	$102,000 (120,000 − 15,000 − 3,000)	$200,000 (220,000 − 20,000)
Box 3	$117,000 (120,000 − 3,000)	$184,500 (wage base)
Box 4	$7,254 (117,000 × 6.2%)	$11,439 (184,500 × 6.2%)
Box 5	$117,000	$220,000
Box 6	$1,696.50 (117,000 × 1.45%)	$3,370 (220,000 × 1.45% + 20,000 × 0.9%)

In Case B, the 0.9% is Additional Medicare Tax that the employer withholds on wages above $200,000. Your actual liability is figured on Form 8959 with your return, so it may not equal the amount withheld.

Box 12 codes you are likely to see

Box 12 reports items that need special tax treatment, each with a letter code and an amount. There are four slots (12a–12d), but the slot does not matter; the code does. If there are more than four items, your employer may issue a second W-2. Common codes:

Code	What it is	Tax note
C	Taxable cost of group-term life insurance over $50,000	Already included in Boxes 1, 3 (up to the wage base), and 5.
D	Elective deferrals to a 401(k)	Not in Box 1. For 2026, elective deferrals and designated Roth contributions are generally limited to $24,500 in total. Age-50 catch-up contributions are included in the same code.
E	Elective deferrals to a 403(b)	Not in Box 1 (included in Boxes 3 and 5).
J	Nontaxable sick pay	Information only; not in Boxes 1, 3, or 5.
V	Income from exercising nonstatutory stock options	Included in Boxes 1, 3 (up to the wage base), and 5.
W	Employer contributions to an HSA (including employee contributions through a cafeteria plan)	Report on Form 8889.
AA	Designated Roth contributions to a 401(k)	After-tax; included in Box 1.
DD	Cost of employer-sponsored health coverage	For your information only. Not taxable.
FF	Permitted benefits under a QSEHRA	For 2026, the maximum is $6,450 ($13,100 with family coverage).
TA	Employer contributions to a Trump account (new for 2026)	Starting July 4, 2026, up to $2,500 a year is excluded from the employee’s income.
TP	Total cash tips reported to the employer (new)	Used for the tips deduction; paired with the occupation code in Box 14b.
TT	Total qualified overtime compensation (new)	Only the premium portion, such as the “half” of time-and-a-half.

Other codes include G (457(b)), S (SIMPLE IRA), BB (Roth 403(b)), EE (Roth governmental 457(b)), T (adoption benefits), and L (nontaxable business expense reimbursements). If you see a code you do not recognize, check the Instructions for Employee on the back of your W-2.

New for 2026: codes TA, TP, TT and Box 14b

The One Big Beautiful Bill Act (OBBBA, P.L. 119-21), enacted July 4, 2025, lets eligible individuals deduct up to $25,000 of qualified tips and up to $12,500 of qualified overtime compensation ($25,000 if married filing jointly) for tax years 2025 through 2028. The 2026 W-2 shows the amounts used for these deductions.

• Code TP: total cash tips you reported to your employer. Box 14b lists up to two Treasury Tipped Occupation Codes for the jobs in which you received tips.
• Code TT: overtime required under section 7 of the Fair Labor Standards Act (FLSA) that exceeds your regular rate. For time-and-a-half, only the “half” is reported.
• Code TA: employer contributions under a section 128 program to a Trump account, a new type of traditional IRA for a child under age 18.

Tips (if $20 or more a month) and overtime pay are still generally subject to federal income tax withholding and to Social Security and Medicare tax. The deductions are claimed on Schedule 1-A of your return, and they come with requirements such as a qualifying tipped occupation or overtime required under the FLSA, so check them before you file.

Boxes 13, 14, and 15–20

Box 13 checkboxes

• Statutory employee: certain workers, such as some delivery drivers and life insurance agents, whose pay is subject to Social Security and Medicare tax but not federal income tax withholding.
• Retirement plan: checked if you were an active participant in an employer retirement plan such as a 401(k) for any part of the year. This can limit your deduction for traditional IRA contributions (see Publication 590-A).
• Third-party sick pay: checked when the form reports sick pay paid by a third party, such as an insurer.

Boxes 14a and 14b

Box 14a (Other) is for extra information from your employer. IRS examples include state disability insurance taxes withheld, union dues, health insurance premiums deducted, nontaxable income, and educational assistance. Employers choose the labels, so ask payroll if one is unclear. Box 14b holds the tipped occupation codes.

Boxes 15–20 (state and local)

Box	Label	What it shows
15	State / Employer’s state ID number	Two-letter state code and the employer’s state ID number
16	State wages, tips, etc.	Wages subject to state income tax
17	State income tax	State income tax withheld
18	Local wages, tips, etc.	Wages subject to local (for example, city) income tax
19	Local income tax	Local income tax withheld
20	Locality name	Name of the local tax

One W-2 can report two states and two localities; if more are needed, the employer issues another W-2. If you moved during the year, or live in one state and work in another, more than one state may appear. States have their own rules, so Box 16 does not always equal Box 1.

How the W-2 differs from Japan’s withholding slip

Japan’s 給与所得の源泉徴収票 and the U.S. W-2 both show a year of pay and withholding, but they play very different roles. Comparing the W-2 with the National Tax Agency’s guide for preparing withholding slips:

Item	U.S. Form W-2	Japan’s withholding slip
Pay	Box 1: taxable wages, after pre-tax 401(k) deferrals	支払金額: total pay for the year
Tax	Box 2: tax withheld, not your final tax	源泉徴収税額: income tax (incl. reconstruction tax) after year-end adjustment
Deductions	Not shown; figured on your return	Shown for employees who had the year-end adjustment
Social insurance	Boxes 4 and 6: Social Security and Medicare tax	社会保険料等の金額: premiums, including employee contributions to a corporate DC plan
Retirement contributions	Pre-tax 401(k) left out of Box 1, shown in Box 12	Corporate DC contributions stay in 支払金額 and are deducted in 社会保険料等の金額
Local tax	Boxes 15–20: state and local income tax	No line for resident tax (住民税)
Deadline	Feb. 1, 2027 (for 2026)	Feb. 2, 2026 (for 2025); within one month for mid-year leavers
Next step	You file Form 1040 and settle the tax	Most employees are done; no return needed

In Japan, the employer’s year-end adjustment settles most employees’ income tax, so the slip is close to the final answer (people whose pay exceeds ¥20 million, among others, must still file). In the U.S., the W-2 is an input to your return. The W-2’s Notice to Employee notes that even if you don’t have to file, you may be eligible for a refund if Box 2 shows an amount, and you only get that refund by filing.

In your arrival year, or if part of your pay is paid in Japan, your Japanese withholding slip may also be needed for your U.S. return (see the documents checklist below).

What to check when your W-2 arrives

1. Your name, SSN, and address. If something is wrong, ask your employer for a corrected Form W-2c. If your name and SSN are correct but differ from your Social Security card, get a new card from the SSA.
2. Compare Box 1 with the year-to-date figures on your last pay stub. The difference should be explained by pre-tax deductions such as 401(k) and health premiums.
3. Check that Boxes 2, 17, and 19 match the year-to-date withholding on your pay stubs.
4. If you had more than one employer and more than $11,439 of Social Security tax was withheld in total for 2026, you may be able to claim the excess as a credit on your return.
5. Make sure your Box 12 deferrals (code D, AA, and so on) across all plans do not exceed the 2026 limit, generally $24,500.
6. Note whether the Retirement plan box in Box 13 is checked; it affects IRA deduction limits.
7. If you moved or worked in more than one state, confirm that Boxes 15–20 match where you lived and worked.

FAQ

My former employer has not sent my W-2. What can I do?

Employers must give former employees their 2026 W-2 by February 1, 2027. If you request it, the employer should provide it within 30 days of the request or of the final wage payment, whichever is later. Contact your former employer’s HR or payroll team with your current address. If you are moving back to Japan, give them your Japanese address.

Do I add the Box 12, code DD amount to my income?

No. Code DD shows the cost of employer-sponsored health coverage for your information, and the IRS states that it is not taxable.

If I am not required to file, can I ignore my W-2?

Federal income tax withheld (Box 2) is only refunded if you file a return. Even if you are not required to file, you may be able to get a refund by filing if Box 2 shows an amount.

What if my W-2 has an error?

Ask your employer to issue a Form W-2c (Corrected Wage and Tax Statement), and keep your copies with your return records.

At CLT NY INC., an IRS Enrolled Agent can review your W-2 with you and prepare federal and state returns for Japanese expatriates, local hires, and green card holders, in Japanese or English. Contact us.

Related articles

• First-Time US Tax Filing: Essential Documents (W-2/1099) and Preparation Flow Complete Guide
• U.S. Tax Return Documents Checklist for Japanese Expats and Permanent Residents
• Comprehensive Guide: Understanding the Fundamental Differences Between US Tax Filing (Form 1040) and Japan’s Year-End Adjustment
• Mastering Form W-4: A Comprehensive Guide for Japanese Nationals on Adjusting U.S. Tax Withholding
• High Earners Beware! The Income Threshold and Underpayment Risks of the FICA Additional Medicare Tax (0.9%)
• Exempt FICA Tax with the Japan-US Social Security Agreement: A Guide to Obtaining a Certificate of Coverage for Expatriates

Sources: IRS, General Instructions for Forms W-2 and W-3 (2026); IRS, Form W-2 (2026); IRS, Publication 15-B (2026); IRS, Publication 519 (2025); IRS, Totalization agreements; National Tax Agency of Japan, 2025 guide to preparing withholding slips (給与所得の源泉徴収票等の法定調書の作成と提出の手引) (pages on 支払金額, 給与所得控除後の金額, 所得控除の額の合計額, 源泉徴収税額, 社会保険料等の金額, and other notes); NTA Tax Answer No.1900; NTA, 給与所得者と税. Information as of October 2026. This article provides general information and is not individual tax advice.