What Is a Nonstandard W2 and How Do You Report It?
Demystify nonstandard W2 forms. Get clear guidance on understanding unique entries and accurately reporting them for your tax return.
A W-2, or Wage and Tax Statement, is an Internal Revenue Service (IRS) form employers issue annually to report wages paid and taxes withheld. Employees use this document to file their federal and state income tax returns. While most W-2 forms are straightforward, some may contain unique entries or be issued under special circumstances, classifying them as “nonstandard.”
Identifying a Nonstandard W2
A W-2 form can be identified as nonstandard through certain visual cues. One common indicator is if the “Corrected” box is checked, signifying that it is a Form W-2c, which is used to amend errors on a previously issued W-2. Another sign is the presence of unusual or unfamiliar codes and amounts in specific boxes, particularly Box 12 or Box 14. These boxes are designed to report various types of compensation, benefits, or deductions that do not fit into other standard categories. A nonstandard W-2 is not inherently problematic; it simply means the form contains information beyond typical wage and tax reporting.
Common Reasons for a Nonstandard W2
Employers issue nonstandard W-2s for various reasons, reflecting specific compensation structures or corrections. These include corrections to previously issued W-2s, such as for errors in names or wage amounts. Nonstandard W-2s also arise when employers report specific benefits requiring special reporting, like employer-sponsored health coverage or retirement plan contributions. Additionally, unique employee classifications, such as statutory or household employees, can lead to different reporting requirements.
Interpreting Unique W2 Entries
Specific entries in Boxes 12 and 14 often make a W-2 nonstandard, requiring careful interpretation. Box 12 uses letter codes to identify various types of compensation or benefits. For example, “DD” indicates the cost of employer-sponsored health coverage, which is for informational purposes. Code “W” represents employer contributions to a Health Savings Account (HSA), while “Z” signifies income from non-qualified deferred compensation plans. Other codes like “V” denote income from nonstatutory stock options, and “EE” reports designated Roth contributions under a governmental 457(b) plan.
Box 14 is a flexible area where employers report additional tax information not fitting elsewhere. Entries often include state disability insurance (SDI) taxes withheld, which can sometimes be deductible depending on state regulations. Union dues, if paid through payroll deductions, may also appear. Additionally, after-tax 401(k) contributions might be listed here for informational purposes. The descriptions in Box 14 are not standardized, so employers may use abbreviations or unique labels.
Reporting a Nonstandard W2
Reporting a nonstandard W-2 involves accurately transferring unique entries to the correct lines or schedules. Information from Box 12, depending on the code, may need to be entered on specific forms. For instance, HSA contributions (Code W) are reported on Form 8889, Health Savings Accounts. Income from nonstatutory stock options (Code V) is typically included in Box 1 wages but may also require reporting on Schedule D, Capital Gains and Losses, or Form 8949.
Entries in Box 14 generally serve informational purposes, but some may directly impact your tax return. For example, state disability insurance payments listed in Box 14 might be deductible as state and local taxes on Schedule A, if you itemize. If your W-2 is a corrected W-2c, use the updated information to file your tax return. If you filed based on the original W-2 before receiving a W-2c, and the corrected information changes your tax liability, you may need to file an amended return using Form 1040-X.