What Is Box 12 on a W-2? The Codes Explained

The W-2 form is a document employers issue annually, summarizing an individual’s wages and taxes withheld for the year. Box 12 on this form is a specific section that reports various types of compensation, benefits, and deductions not detailed in other boxes. It functions as a comprehensive reporting area for information relevant to an individual’s tax situation, providing data the IRS uses for verification and compliance.

Understanding Box 12 Codes and Amounts

Box 12 contains specific codes, each representing different types of income, benefits, or contributions. The amounts accompanying these codes can be taxable, non-taxable, or for informational purposes.

Code D indicates elective deferrals to a 401(k) plan, including SIMPLE 401(k) arrangements. This amount represents pre-tax contributions made to a retirement account. Code DD reports the total cost of employer-sponsored health coverage. This amount is for informational purposes only, generally not taxable, and includes both the employer’s and employee’s contributions to the health plan.

Code E signifies elective deferrals to a 403(b) plan, commonly used by employees of public schools and certain non-profit organizations for retirement savings. Code S shows employee salary reduction contributions under a Section 408(p) SIMPLE (Savings Incentive Match Plan for Employees) plan.

Code W represents employer contributions to a Health Savings Account (HSA), which can include amounts an employee elected to contribute through a cafeteria plan. This amount is generally not included in Box 1, 3, or 5 wages. Code V reports income from the exercise of nonstatutory stock options. This amount is already included in Boxes 1, 3, and 5 of the W-2.

Code AA denotes designated Roth contributions to a 401(k) plan. These are after-tax contributions to a Roth retirement account. Similarly, Code BB indicates designated Roth contributions to a 403(b) plan.

Code CC represents elective deferrals under a Section 457(b) deferred compensation plan. This code is used for government and certain non-profit deferred compensation plans. Code P signifies excludable moving expense reimbursements paid directly to a member of the U.S. Armed Forces for military orders. This amount is not included in Boxes 1, 3, or 5.

How Box 12 Information Affects Your Tax Return

Information in Box 12 of your W-2 plays a role in preparing your tax return, influencing taxable income, and sometimes requiring additional forms. The amounts reported with various codes can lead to deductions or may simply be for informational tracking by the IRS.

Amounts reported under codes such as D, E, S, W, AA, BB, and CC relate to retirement and health savings contributions. For instance, elective deferrals to 401(k) (Code D) or 403(b) (Code E) plans are pre-tax contributions, which reduce your taxable income reported in Box 1 of your W-2. These pre-tax contributions do not require separate deduction entries on your tax return as they have already lowered your reported wages. Contributions to a Health Savings Account (Code W) may require filing Form 8889, Health Savings Accounts (HSAs), to report deductions or distributions.

Conversely, Code DD, representing the cost of employer-sponsored health coverage, is purely informational and does not impact your taxable income or require any specific tax form entries. Income from the exercise of nonstatutory stock options (Code V) is already included in your Box 1 wages, so it does not result in an additional tax burden or require separate reporting beyond what is listed on the W-2. However, this income might require reporting on Schedule D if the shares were sold.

Designated Roth contributions, indicated by codes like AA and BB, are after-tax contributions. They do not reduce your current taxable income because taxes were already paid on those funds. These amounts are important for tracking Roth account balances and future tax-free distributions. Excludable moving expense reimbursements for armed forces members (Code P) are non-taxable and typically do not affect your overall taxable income, though they may relate to Form 3903, Moving Expenses.

Addressing Common Box 12 Questions

If Box 12 on your W-2 appears blank, and you are certain no special items apply to you, then no action is typically needed. However, if you believe Box 12 should contain entries or if the amounts seem incorrect, it is important to contact your employer’s payroll department promptly. They can review the information and issue a corrected W-2, known as a Form W-2c, if an error is identified.

It is common to see multiple entries in Box 12, as there are four distinct lines (12a, 12b, 12c, and 12d) available for different codes and amounts. If an employer needs to report more than four Box 12 codes, they will issue an additional W-2 form to accommodate all necessary entries.

For less common codes that are not explicitly detailed, the IRS provides comprehensive instructions for Forms W-2 and W-3, which list and explain all possible Box 12 codes. These instructions are publicly available on the IRS website.