What Goes in Box 12 on a W-2 & What the Codes Mean

The W-2 form, or Wage and Tax Statement, summarizes an individual’s annual earnings and tax withholdings. This document is essential for filing income taxes, providing the Internal Revenue Service (IRS) and the taxpayer with a clear record of compensation and amounts already paid toward tax liabilities. Box 12 reports various compensation, benefits, and deductions with particular tax treatments. Understanding these entries is important for accurate tax preparation.

Purpose of Box 12

Box 12 on the W-2 form reports items beyond standard wages, Social Security wages, or Medicare wages. This section captures diverse income, benefits, and contributions with unique tax implications. Employers use specific letter codes to categorize these amounts. These codes inform the taxpayer and IRS about the taxability or informational purpose of the reported figures. Proper interpretation is necessary for correctly completing a tax return.

Decoding Common Box 12 Entries

Several codes frequently appear in Box 12, each representing a distinct type of compensation or benefit. These common entries include contributions to retirement plans, health-related benefits, and certain income types.

Code “D” indicates elective deferrals to a Section 401(k) cash or deferred arrangement, including SIMPLE 401(k) plans. This amount represents pre-tax contributions, generally not included in Box 1 wages. These funds grow tax-deferred until withdrawal.

Code “DD” reports the cost of employer-sponsored health coverage. This amount is for informational purposes only and is not included in taxable income. It provides transparency regarding the total value of health benefits.

Code “W” signifies employer contributions to a Health Savings Account (HSA). These contributions, which can include amounts elected by the employee, are generally non-taxable. HSAs offer a tax-advantaged way to save for future medical expenses.

Code “V” denotes income from the exercise of nonstatutory stock options. The amount reported here is typically taxable and is also included in Box 1, Box 3, and Box 5. This reflects the gain realized when the option is exercised.

Code “E” represents elective deferrals made under a Section 403(b) salary reduction agreement. This applies to contributions to retirement plans for employees of public schools and certain tax-exempt organizations. Similar to 401(k) contributions, these are generally pre-tax amounts that reduce current taxable income.

Code “P” indicates excludable moving expense reimbursements paid directly to a member of the U.S. Armed Forces. This amount is non-taxable and is typically not included in Box 1, 3, or 5 wages.

Code “S” reports employee salary reduction contributions made under a Section 408(p) SIMPLE plan. This refers to contributions to a Savings Incentive Match Plan for Employees (SIMPLE) IRA. These contributions are generally pre-tax and reduce the employee’s taxable income.

Understanding Other Box 12 Codes

Beyond common entries, Box 12 includes various other codes reporting less frequently encountered financial information. These codes cover uncollected taxes, specific types of benefits, and deferred compensation.

Code ‘A’ and ‘B’: Report uncollected Social Security and Medicare taxes on tips. These amounts must be accounted for on the tax return.
Code ‘C’: Indicates the taxable cost of group-term life insurance coverage exceeding $50,000. This amount is also included in Boxes 1, 3, and 5.
Code ‘F’: Elective deferrals under a Section 408(k)(6) salary reduction SEP plan.
Code ‘G’: Elective deferrals and employer contributions to a Section 457(b) deferred compensation plan.
Code ‘H’: Elective deferrals to a Section 501(c)(18)(D) tax-exempt organization plan.
Code ‘J’: Nontaxable sick pay, for informational purposes.
Code ‘K’: 20% excise tax on excess golden parachute payments.
Code ‘L’: Substantiated non-taxable employee business expense reimbursements. Not included in Box 1 income.
Code ‘M’ and ‘N’: Uncollected Social Security and Medicare taxes 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’: Employer-provided adoption benefits. Form 8839 may be required.
Code ‘Y’: Deferrals under a Section 409A nonqualified deferred compensation plan, for informational purposes.
Code ‘Z’: Income under a nonqualified deferred compensation plan that fails to satisfy Section 409A. Included in Box 1 wages and subject to an additional 20% tax plus interest.
Code ‘AA,’ ‘BB,’ and ‘EE’: Designated Roth contributions under Section 401(k), 403(b), and governmental 457(b) plans. These are after-tax contributions reported for informational purposes.
Code ‘FF’: Permitted benefits under a qualified small employer health reimbursement arrangement (QSEHRA), an informational code.

Using Box 12 Information on Your Tax Return

The information in Box 12 of your W-2 form is directly utilized when preparing your annual tax return. Each code and its corresponding amount plays a specific role in calculating your final tax liability or providing necessary data to the IRS. Amounts reported in Box 12 are typically entered on Form 1040 or its associated schedules. While some codes like “DD” (cost of employer-sponsored health coverage) are purely informational, others, such as “D” (401(k) contributions), represent pre-tax deductions that reduce your adjusted gross income. Tax preparation software or a professional preparer will prompt for the Box 12 codes and amounts, automatically placing them on the correct lines of your tax forms and helping prevent processing delays or discrepancies.