How to Correctly Fill Out Box 12 on Form W-2?

Form W-2 is the statement employers must send to employees and the Internal Revenue Service (IRS) at the end of each year, detailing an employee’s annual wages and the amount of taxes withheld. While many boxes on the form are straightforward, Box 12 is an informational section used to report various other forms of compensation and benefits. The amounts reported here provide a more complete picture of an employee’s financial relationship with the employer, and these figures are necessary for correct tax return preparation.

Understanding the Purpose and Structure of Box 12

The primary function of Box 12 on Form W-2 is to report compensation and benefits that are not included in the standard wage and salary figures found in Box 1. These can include items like pre-tax contributions to retirement plans, the value of certain employer-provided health benefits, or other non-taxable payments that can influence an employee’s tax liability.

The amounts reported in Box 12 can have a direct impact on an employee’s tax calculations. For example, contributions to a 401(k) plan reported in Box 12 reduce an employee’s taxable income for the year. Other entries, like the cost of employer-sponsored health coverage, are for informational purposes only but are still required to be reported by the employer. This data helps the employee, or their tax preparer, accurately complete various lines on their Form 1040.

Physically, Box 12 is divided into four smaller sections: 12a, 12b, 12c, and 12d. This layout allows an employer to report up to four separate items for a single employee on one W-2 form. Each entry within these sub-boxes consists of two parts: a single or double-letter code that identifies the type of compensation or benefit, and a corresponding dollar amount for that specific item.

A Comprehensive Guide to Box 12 Codes

The codes used in Box 12 are designated by the IRS and cover a wide range of items. Each code corresponds to a specific type of payment, benefit, or deferral that must be quantified based on payroll and benefits records from the calendar year.

Retirement Plan Contributions

Several codes relate to employee and employer contributions to various retirement plans.

• Code D is used for elective deferrals to a 401(k) plan, representing the total amount the employee chose to contribute from their salary.
• Code E reports elective deferrals to a 403(b) salary reduction agreement, common in non-profit organizations and schools.
• Code F is for elective deferrals under a 408(k) salary reduction Simplified Employee Pension (SEP) plan.
• Code G is used for elective and non-elective deferrals to a section 457 deferred compensation plan, often available to state and local government employees.
• Code H signifies elective deferrals to a section 501(c) tax-exempt organization plan.
• Code AA is for designated Roth contributions to a 401(k) plan.
• Code BB is for Roth contributions to a 403(b) plan.
• Code EE is for such contributions to a governmental 457 plan.

Health and Insurance-Related Items

Code C shows the taxable cost of group-term life insurance coverage provided by an employer that exceeds $50,000. This amount is also included in the employee’s wages in Boxes 1, 3, and 5 of the W-2. Code DD reports the total cost of employer-sponsored health coverage. This figure includes both the portion paid by the employer and the portion paid by the employee, but it is for informational purposes only and does not affect the employee’s taxable income. Code W is used to report employer contributions to an employee’s Health Savings Account (HSA).

Other Compensation and Benefits

A variety of other payments and benefits are also captured in Box 12.

• Code P is used for moving expense reimbursements paid to members of the U.S. Armed Forces on active duty who are moving due to a military order.
• Code T reports adoption benefits provided by an employer, which may be excludable from the employee’s income.
• Code V is for income from the exercise of nonstatutory stock options. This amount is also included as income in Box 1 and is subject to federal income, Social Security, and Medicare taxes.
• Code Y is used to report deferrals under a Section 409A nonqualified deferred compensation plan.
• Code Z reports income under a nonqualified deferred compensation plan that fails to meet the requirements of Section 409A, which typically results in immediate taxation and penalties for the employee.

How to Report Amounts in Box 12

When entering information into Box 12 of Form W-2, specific formatting rules must be followed. The codes themselves must always be entered using capital letters. For example, an employee’s 401(k) contribution is reported with a capital “D,” not a lowercase “d.”

Following the capital letter code, the corresponding financial amount is entered in the same sub-box. You must enter only the numbers, using a decimal point for cents, but without including a dollar sign ($). For instance, if an employee contributed $5,500.75 to their 401(k), the entry in Box 12a would show “D” followed by “5500.75”.

An employee may have more than four reportable items for Box 12. Since a single Form W-2 only has space for four entries, the employer must use a second Form W-2 to report the additional items. When this occurs, the employer completes the employee and employer identification information on the second form and then continues reporting the additional Box 12 codes and amounts. All other boxes related to wages and taxes on the second form are left blank.

If any of the Box 12 codes being reported relate to a retirement plan, the “Retirement plan” checkbox in Box 13 must be checked. If an employee has more than four Box 12 items and a second W-2 is required, this box should only be checked on one of the forms to avoid suggesting the employee participates in multiple plans when they do not.

Filing a Correction for Box 12 Information

If an error is discovered in Box 12 on a Form W-2 that has already been filed with the SSA, a correction must be made using Form W-2c, Corrected Wage and Tax Statement. The first step is to gather the necessary information, which includes the data from the original, incorrect W-2 and the accurate information that will replace it.

Completing Form W-2c requires entering both the previously reported information and the correct information. For a Box 12 correction, you would fill in the “Previously reported” column with the exact code and dollar amount from the original W-2, even if it was zero. In the “Correct information” column, you would then enter the accurate code and dollar amount.

A transmittal form, Form W-3c, must accompany one or more W-2c forms when they are sent to the SSA. The employer is responsible for filing these forms with the SSA and must also provide copies of the completed Form W-2c to the employee. The employee will then need this corrected form to amend their personal income tax return if they have already filed it.

If the only error on the original W-2 was related to state or local tax information in Boxes 15 through 20, a Form W-2c should not be filed with the SSA. In such cases, the correction is handled directly with the relevant state or local tax agency according to their specific procedures. The employee should still receive a copy of the corrected form for their records.