As a high schooler beginning to explore financial literacy, there can be a dizzying array of terms and documents you have to navigate. Have you been curious about that W-2 form your parents always discuss during tax time? Don't worry; many others find this piece of paper hard to decipher - but it's something you need to learn about as you start your career. So strap yourself in as we embark on our mission to decode it and make it an important part of your financial arsenal!

 

What is a W-2? 

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Think of a W-2 like your earnings report card: it tells the government how much is due (or due from them!) - as well as providing valuable insights into income and expenses, progress towards meeting financial goals, and making informed decisions for your future.

 

What is on a W-2 form?

 

Here is a breakdown of some of the crucial sections:

• Box 1: Your total wages earned from your employer - think of this as the big prize in your financial year-end game!

• Box 2: Federal income taxes withheld; this serves as your "pay in advance" option if applicable (and any overpayment will be returned as a refund!).

• Box 3: Social Security and Medicare taxes withheld are like tiny investments into your future retirement and healthcare costs; think of them as investing in yourself! 

• Box 4: State income taxes may also be withheld depending on where you reside; some states levy an income tax upon their residents' earnings.

• Box 6: Any pre-tax contributions you made towards benefits such as health insurance or retirement plans that help to lower your taxable income and thus lower taxes! By contributing before filing taxes, these deductions lower taxable income - meaning fewer taxes for you!

 

There are more, but in an effort to keep you awake, we’re going to stick with the ones most relevant to you.

 

Why Is a W-2 Important?

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• Come tax season, it will be essential that you have your W-2 handy to file accurate federal and state income tax returns. This form reveals whether you owe taxes or can expect a refund.

• Your W-2 provides official proof of your income, which can be necessary when renting an apartment or applying for financial aid for college.

• By studying your W-2, you gain insight into your earnings, tax contributions and deductions - providing valuable knowledge that allows for informed financial decisions and planning for the future. 

 

For high school financial whiz-kids like you, mastering your W-2 tax return is an integral component of financial literacy. Take this chance to understand its contents, and you'll be well-equipped to navigate the maze of tax codes, make sound financial decisions, and lay a solid foundation for future financial success.

 

Bonus Tip: Secure your W-2s! They will come in handy for filing taxes, taking out loans, or renting apartments - basically serving as your financial history!