What Are the Box 12 Codes on a W-2?

The W-2 form serves as an annual summary of an individual’s earnings and tax withholdings from their employer. Box 12 is a specific section used to report various types of compensation, benefits, or deductions not reflected in other boxes or requiring separate disclosure. This box is segmented into four lines, 12a through 12d, each containing a letter code followed by a dollar amount. Understanding the specific codes reported in Box 12 is important for accurate tax filing, as they can influence how certain income or contributions are treated on a tax return.

Understanding Common Box 12 Codes

Code D indicates elective deferrals to a 401(k) plan, including SIMPLE 401(k) arrangements. This amount represents pre-tax contributions made by an employee, reducing their taxable wages reported in Box 1.

Code DD signifies the cost of employer-sponsored health coverage. This amount is not taxable to the employee and does not affect their taxable income or deductions, providing transparency regarding the total value of health benefits provided by the employer.

Employer contributions to a Health Savings Account (HSA) are shown with Code W. These contributions are generally not included in the employee’s taxable income. Information related to HSA contributions is typically reported on Form 8889, Health Savings Accounts (HSAs).

Code V reports income from the exercise of nonstatutory stock options. This amount is already included in Boxes 1, 3 (up to the Social Security wage base), and 5 of the W-2 as taxable wages. While reported in Box 12, it may necessitate reporting on Schedule D if the shares are subsequently sold.

For members of the U.S. Armed Forces, Code P denotes excludable moving expense reimbursements paid directly to the employee for military orders. These reimbursements are not included in Boxes 1, 3, or 5 of the W-2 because they are non-taxable.

Code Y indicates deferrals under a Section 409A nonqualified deferred compensation plan.

Code E represents elective deferrals under a Section 403(b) salary reduction agreement. Code F is for elective deferrals under a Section 408(k)(6) salary reduction SEP (Simplified Employee Pension) plan.

Code G covers elective deferrals and employer contributions to a Section 457(b) deferred compensation plan. Code H refers to elective deferrals to a Section 501(c)(18)(D) tax-exempt organization plan.

Less Frequently Encountered Box 12 Codes

Code J denotes nontaxable sick pay, reflecting sick pay paid by a third party that is not includible in income. Code K signifies the 20% excise tax on excess golden parachute payments, which applies to certain payments made to executives upon a change in corporate ownership or control.

Code L represents substantiated employee business expense reimbursements that are nontaxable. For former employees, Codes M and N report uncollected Social Security and Medicare tax, respectively, on the taxable cost of group-term life insurance exceeding $50,000.

Employer contributions to an Archer Medical Savings Account (MSA) are designated by Code R, while Code S indicates employee salary reduction contributions under a Section 408(p) SIMPLE plan.

Code AA is for designated Roth contributions to a 401(k) plan, Code BB for a 403(b) plan, and Code EE for a governmental 457(b) plan. These contributions are made with after-tax dollars, meaning they do not reduce current taxable income.

Code FF pertains to permitted benefits under a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). This code reports the maximum amount an eligible employee was entitled to receive from such an arrangement during the year.

Codes GG and HH relate to qualified equity grants. Code GG indicates income from qualified equity grants under Section 83(i), while Code HH represents aggregate deferrals under Section 83(i) elections as of the close of the calendar year.

How Box 12 Information Impacts Your Tax Return

The information in Box 12 of a W-2 form plays a role in accurately preparing a federal income tax return. Some codes, like Code V for nonstatutory stock options, represent amounts already included in Box 1 wages. These amounts provide additional detail about the composition of the reported wages.

Other codes signify pre-tax deductions, which reduce the taxable income reported in Box 1. For example, Code D for 401(k) contributions represents amounts deducted from an employee’s gross pay before taxes were calculated, lowering their taxable earnings and impacting income tax liability.

Certain Box 12 codes are purely informational and do not directly affect taxable income or deductions. Code DD, indicating the cost of employer-sponsored health coverage, is a prime example. It provides valuable insight into the value of benefits received.

Depending on the specific code, the information in Box 12 may require entry on particular IRS forms or schedules. For instance, contributions to a Health Savings Account (HSA) reported with Code W are reconciled on Form 8889, Health Savings Accounts (HSAs). Understanding the purpose of each code helps ensure that all relevant amounts are correctly accounted for during tax preparation.