Where to Find 414(h) on Your W-2 Form?

The W-2 form serves as a fundamental document for reporting an individual’s annual income and withheld taxes to the Internal Revenue Service. This form contains various boxes and codes, each providing specific financial information essential for accurate tax preparation and compliance. Section 414(h) contributions often appear as a distinctive and sometimes puzzling entry. This article clarifies their placement on the W-2, their purpose, and their financial significance for the taxpayer.

Finding 414(h) on Your W-2

Locating Section 414(h) contributions on your W-2 form involves examining Box 14, labeled “Other Information.” This box is designated for employers to report items relevant to an employee’s compensation or benefits that do not have a dedicated box elsewhere on the W-2. When reviewing Box 14, look for notations such as “414(h)”, “414h”, “414H”, or “414(h) pre-tax” listed alongside a dollar amount. The precise wording may vary. If the notation is not clear or if multiple entries exist, cross-reference with a detailed pay stub or contact the employer’s payroll department for clarification.

The amount displayed in Box 14 for 414(h) is informational. This figure indicates contributions already taken into account when calculating the wages reported in Box 1 for federal income tax purposes, reflecting their pre-tax treatment.

What 414(h) Means

Section 414(h) refers to a specific provision within the Internal Revenue Code that addresses pre-tax retirement contributions made to governmental plans. These contributions are predominantly associated with employees working for public sector entities, including state and local governments, and public education institutions.

Under this provision, the employer “picks up” or pays the employee’s mandatory contributions to a governmental retirement plan. Although the employer makes these payments, the amounts are legally treated as a reduction in the employee’s gross salary for federal income tax purposes. This arrangement allows employees to defer federal income tax on the contributed amounts until retirement.

A distinguishing feature of 414(h) contributions is their specific application to governmental retirement plans, setting them apart from private sector plans like 401(k)s or 403(b)s. For many public employees, participation in such a retirement system and the corresponding 414(h) contributions are a mandatory condition of their employment, designed to ensure long-term financial security upon retirement. This provision aims to encourage retirement savings by providing immediate tax benefits through a reduction in current taxable income.

How 414(h) Affects Your Taxes

Section 414(h) contributions offer a tax advantage by being pre-tax for federal income tax purposes, directly impacting your taxable income. This means the amount of these contributions is subtracted from your gross wages before federal income tax is calculated, resulting in a lower taxable income figure reported in Box 1 of your W-2 form. This reduction lowers your current year’s federal income tax liability.

A key distinction for 414(h) contributions is their treatment for Social Security and Medicare taxes, collectively known as FICA taxes. Unlike many other pre-tax deductions, these contributions are subject to FICA taxes. Consequently, the amounts contributed under Section 414(h) are included in the wages reported in Box 3 (Social Security wages) and Box 5 (Medicare wages) of your W-2, meaning they do not reduce your FICA tax obligations.

Taxpayers do not need to perform special calculations or adjustments for 414(h) amounts when preparing their federal income tax return, as the pre-tax adjustment is already reflected in Box 1 wages. The tax deferral on these amounts continues until distributions are received during retirement, where withdrawals are then taxed as ordinary income.