What Do the Codes in W2 Box 12 Mean for Taxes?

The W-2 form, or Wage and Tax Statement, is an annual document from your employer summarizing earnings and taxes withheld. Box 12 reports various types of compensation, benefits, and deductions not typically included in the primary wages listed in Box 1. Understanding these codes and amounts is important for accurate tax filing, ensuring all relevant income and adjustments are accounted for.

Common Box 12 Codes and Their Meaning

Box 12 of the W-2 form can contain various codes, each representing a specific type of income, benefit, or contribution.

Retirement Contributions

Code D: Elective deferrals to a 401(k) plan, including SIMPLE 401(k). This reflects pre-tax contributions.
Code E: Elective deferrals to a 403(b) plan, common for public school and tax-exempt organization employees.
Code F: Elective deferrals under a Section 408(k)(6) salary reduction Simplified Employee Pension (SEP) plan.
Code G: Elective deferrals and employer contributions, including non-elective deferrals, to a Section 457(b) deferred compensation plan, common for state and local government employees and some tax-exempt organizations.
Code H: Elective deferrals to a Section 501(c)(18)(D) tax-exempt organization plan.
Code S: Employee salary reduction contributions to a Section 408(p) SIMPLE plan.
Code AA: Designated Roth contributions to a 401(k) plan.
Code BB: Designated Roth contributions to a 403(b) plan.
Code EE: Governmental Section 457(b) Roth contributions. These Roth contributions are made with after-tax dollars and generally allow for tax-free withdrawals in retirement.

Health and Other Benefits

Code C: Taxable cost of group-term life insurance coverage exceeding $50,000.
Code DD: Cost of employer-sponsored health coverage. This amount is for informational purposes only and is generally not taxable.
Code W: Employer contributions to a Health Savings Account (HSA), including employee contributions through a cafeteria plan.

Other Income and Adjustments

Code P: Excludable moving expense reimbursements paid directly to a U.S. Armed Forces member, not included in Boxes 1, 3, or 5.
Code V: Income from the exercise of nonstatutory stock options, typically included in Box 1 wages.
Code Y: Deferrals under a Section 409A nonqualified deferred compensation plan.
Code Z: Income from a nonqualified deferred compensation plan that fails to satisfy Section 409A requirements, also included in Box 1 and subject to additional taxes.
Code A: Uncollected Social Security or Railroad Retirement Tax Act (RRTA) tax on tips.
Code B: Uncollected Medicare tax on tips.
Code J: Nontaxable sick pay, for informational purposes and not included in Boxes 1, 3, or 5.
Code L: Substantiated employee business expense reimbursements that are nontaxable.

How Box 12 Codes Affect Your Taxable Income

Box 12 information significantly impacts your taxable income, as codes represent amounts treated differently for tax purposes. Some Box 12 amounts are included in your taxable income, even if not part of primary Box 1 wages. For instance, income from nonstatutory stock options (Code V) is typically added to Box 1 wages and is subject to income tax. Income from nonqualified deferred compensation plans failing Section 409A requirements (Code Z) is fully taxable and may incur an additional 20% tax plus interest.

Conversely, certain Box 12 amounts are for informational purposes only and do not increase taxable income. The cost of employer-sponsored health coverage (Code DD) provides transparency regarding health benefits but is not included in taxable wages. Nontaxable sick pay (Code J) and excludable moving expense reimbursements for military members (Code P) also fall into this category, as they are not subject to income tax.

Many Box 12 codes represent pre-tax contributions or deductions that reduce your taxable income. Elective deferrals to retirement plans like 401(k)s (Code D), 403(b)s (Code E), SEP plans (Code F), and 457(b) plans (Code G) are deducted from gross pay before taxes, lowering your Box 1 taxable wages. Employer contributions to a Health Savings Account (HSA), shown with Code W, also reduce taxable income as these funds are generally deductible.

Reporting Box 12 Information on Your Tax Return

Accurately reporting Box 12 information on your tax return is essential. Most taxpayers use Form 1040, with various schedules required depending on specific codes. While many Box 12 amounts, like income from nonstatutory stock options (Code V), are already factored into Box 1 wages and do not require separate entry, other codes necessitate specific reporting.

Contributions to a Health Savings Account (HSA), indicated by Code W, are generally reported on Form 8889, which then flows to Schedule 1 (Form 1040). Excludable moving expense reimbursements for military personnel (Code P) may be used to calculate a deduction on Form 3903, reported on Schedule 1.

Uncollected Social Security or Medicare taxes on tips (Codes A and B) are reported as additional taxes on Schedule 2 (Form 1040). Retirement plan contributions (Codes D, E, F, G, H, AA, BB, EE) reduce your taxable income in Box 1 and may also qualify you for the Saver’s Credit, calculated on Form 8880 and reported on Schedule 3 (Form 1040).

Addressing Box 12 Discrepancies

If you find an error or discrepancy in Box 12 of your W-2 form, contact your employer’s payroll or human resources department. They are responsible for issuing your W-2 and can investigate the potential error.

If an error is confirmed, your employer will issue a corrected W-2, known as Form W-2c. This form shows the corrected figures. Employers should file Form W-2c as soon as possible after discovering an error.

If you have already filed your tax return using an incorrect W-2, you may need to file an amended tax return once you receive the corrected W-2c. This involves filing Form 1040-X, Amended U.S. Individual Income Tax Return, to adjust your reported income, deductions, or credits based on the corrected information.