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

The W-2 form, or Wage and Tax Statement, serves as a crucial document for taxpayers, summarizing annual earnings and the taxes withheld by employers. Within this form, Box 12 stands out as an area dedicated to reporting various types of compensation, benefits, or deductions that are not always reflected in the main wage boxes. While the information in Box 12 is essential for accurate tax filing, the specific codes and their corresponding amounts can often be a source of confusion for many individuals. Understanding these codes is a necessary step for ensuring tax compliance.

Understanding Box 12 on Your W-2

Box 12 on the W-2 form serves as a dedicated section where employers report specific types of income, benefits, or deductions that have unique tax treatments. Employers utilize this box to provide detailed information beyond regular wages, such as deferred compensation, contributions to health savings accounts, or even uncollected taxes. While the amounts reported here may not always constitute traditional taxable income, they are nevertheless significant for accurate tax calculations and compliance with Internal Revenue Service (IRS) regulations.

Each entry in Box 12 consists of a one or two-letter code followed by a dollar amount. For instance, if an employee contributes to a 401(k) retirement plan, Box 12 will display “D” along with the amount contributed. This structured reporting helps the IRS track various financial activities that may influence an individual’s overall tax liability, deductions, or credits. This information provides a comprehensive financial picture for both the taxpayer and tax authorities.

Common Box 12 Codes Explained

Several Box 12 codes are frequently encountered by taxpayers, each representing distinct financial arrangements with specific tax implications. Understanding these common codes is important for proper tax reporting.

• Code D: Elective deferrals made to a 401(k) plan, including SIMPLE 401(k) arrangements. These are pre-tax contributions that reduce an employee’s taxable wages reported in Box 1 of the W-2.
• Code E: Elective deferrals to a 403(b) plan, commonly used by employees of public schools and certain non-profit organizations.
• Code F: Elective deferrals under a Section 408(k)(6) Salary Reduction Simplified Employee Pension (SEP) plan. These contributions generally lower current taxable income.
• Code G: Elective deferrals and employer contributions, including non-elective deferrals, to a Section 457(b) deferred compensation plan, which is often available to government and certain non-governmental tax-exempt organization employees.
• Code H: Elective deferrals to a Section 501(c)(18)(D) tax-exempt organization plan. For these codes, the amounts typically reduce an individual’s taxable income for the year.
• Code P: Excludable moving expense reimbursements paid directly to members of the U.S. Armed Forces. These amounts are generally not included in taxable income.
• Code S: Employee salary reduction contributions under a Section 408(p) SIMPLE plan, which is a retirement plan for small employers.
• Code W: Employer contributions to a Health Savings Account (HSA), which may also include employee contributions made through a cafeteria plan. This amount is typically not taxable income to the employee and can affect deductions claimed on the tax return.
• Code AA: Designated Roth contributions to a 401(k) plan. Unlike traditional 401(k) contributions, these are made with after-tax dollars and do not reduce current taxable income, but qualified distributions in retirement are tax-free.
• Code BB: Designated Roth contributions to a 403(b) plan. Similar to Roth 401(k) contributions, these are after-tax contributions that allow for tax-free withdrawals in retirement.
• Code DD: Cost of employer-sponsored health coverage. This amount is reported for informational purposes only and is generally not taxable to the employee.

Other Important Box 12 Codes

Beyond the most common entries, several other Box 12 codes report specific financial details that may be relevant to an individual’s tax situation.

• Code A: Uncollected Social Security or Railroad Retirement Tax Act (RRTA) tax on tips.
• Code B: Uncollected Medicare tax on tips. These amounts generally require an additional tax payment on the tax return.
• Code C: Taxable cost of group-term life insurance coverage exceeding $50,000 provided by an employer. This amount is typically already included in Boxes 1, 3, and 5 of the W-2 as taxable wages.
• Code J: Nontaxable sick pay, which is usually for informational purposes and not included in taxable income.
• Code K: 20% excise tax on excess golden parachute payments, which are substantial payments made to executives in connection with a change in company ownership or control.
• Code L: Substantiated employee business expense reimbursements that are nontaxable.
• Code M: Uncollected Social Security or RRTA tax on the taxable cost of group-term life insurance over $50,000 for former employees.
• Code N: Uncollected Medicare tax on the taxable cost of group-term life insurance over $50,000 for former employees.
• Code R: Employer contributions to an Archer Medical Savings Account (MSA).
• Code T: Adoption benefits provided by an employer.
• Code V: Income from the exercise of nonstatutory stock options. This amount is generally taxable income and should be included in Box 1 wages.
• Code Y: Deferrals under a Section 409A nonqualified deferred compensation plan.
• Code Z: Income under a nonqualified deferred compensation plan that fails to satisfy Section 409A requirements, which is typically taxable and subject to an additional 20% tax plus interest.
• Code EE: Designated Roth contributions to a governmental 457(b) plan.
• Code FF: Permitted benefits under a qualified small employer health reimbursement arrangement (QSEHRA).
• Code GG: Income from qualified equity grants under Section 83(i).
• Code HH: Aggregate deferrals under Section 83(i) elections.

These codes cover a range of specific compensation and benefit types that may require particular attention during tax preparation.

How Box 12 Information Affects Your Tax Return

The information contained in Box 12 of your W-2 influences various aspects of your tax return. Amounts reported with codes like D, E, F, G, and S, representing contributions to pre-tax retirement plans, reduce your taxable wages shown in Box 1 of the W-2. This reduction in Box 1 wages lowers your federal taxable income.

Contributions to a Health Savings Account (HSA) reported with Code W can also affect your tax return, as these amounts may be deductible on Form 8889, Health Savings Accounts (HSAs). This deduction further reduces your taxable income. Conversely, some codes, such as V (income from nonstatutory stock options) or Z (income from nonqualified deferred compensation failing Section 409A), represent taxable income that might need to be explicitly added to your gross income if not already included in Box 1. Code Z amounts are also subject to an additional 20% tax plus interest, which must be calculated and reported.

For codes like A and B, which indicate uncollected Social Security and Medicare taxes on tips, these amounts must be reported on Form 1040, Schedule 2, where they increase your tax liability. Other codes, such as DD for the cost of employer-sponsored health coverage, are purely informational and do not directly impact your taxable income or deductions. It is important to accurately transfer all Box 12 codes and their corresponding amounts into tax preparation software or provide them to a tax professional.