Form W-2 represents the statement of wages and taxes of an employee. Employers need to complete this form and hand over a copy to each employee.
Box 12 is used to report additional information on non-taxable amounts using different tax codes.
Let us discuss what is box 12 in Form W-2 and the different codes used to represent different information for employees.
What is Form W-2?
Form W-2 is the wages and tax statement for an employee provided by the employer. Each employer is legally bound to provide the details of wages, salaries, and benefits paid to the employee.
On Form W-2, the employer records different types of details about wages and taxes and is legally bound to provide a copy to the employee as well.
Employers also use W-2 to report their Federal Insurance Contributions Act (FICA) taxes withheld from the salaries of their employees.
What is Box 12 in Form W-12?
Box 12 is one of several columns in Form W-2 to record different types of information about the taxes and salaries of an employee.
Box 12 is used to record the “other contributions” made employer for each employee. For instance, it is used to record employer-sponsored health coverage and 401(k) contributions made by the employer.
W-2 Box 12 Labels and Codes Explained
An employer can record up to four lines on one W-2 Form box 12 at a time. These lines are labeled 12a, 12b, 12c, and 12d.
These small alphabet lines are only labels for these four lines and do not represent any specific code or type of information.
If an employer needs to use more than four lines, a separate Form W-2 must be used. Subsequent forms may contain more than four lines though.
Each line in box 12 has two spaces. The first space is to write a specific code and the second is to write the amount.
These box 12 codes are used for specific types of deductions and contributions.
Box 12 Codes
A It denotes uncollected social security tax or railroad retirement tax act (RRTA) on tips. You’ll enter “A” in the first space and amount in the second space in one of four boxes 12 lines.
B Uncollected Medicare tax on tips. You’ll write this tax on Form 1040 Schedule 2 line 13. Write code “B” and the amount in box 12 if you didn’t withhold the Medicare tax.
C Write Code “C” and the amount in box 12 if you provide group life insurance coverage above $50,000. You’ll also enter the same in boxes 1,3 and 5. This amount is not taxable for employees.
D This code is used to represent elective deferrals for 401(k) cash or a deferred arrangement plan. You’ll also check the retirement contribution box 13.
E Use code “E” to declare the elective deferral for 403(b) retirement plan contributions from your employees. Also, check the retirement plan box 13.
F Enter code “F” and the amount in box 12 if your employee’s salary is deducted for a 408(k) (6) retirement plan including a Simplified Employee Pension (SEP) Plan.
G Government entities will use this code to highlight the retirement contribution amounts for elective deferrals and employee contributions. Employers will use it if employees contribute to these 457(b) plans.
H This code is used for employee contribution plans used by tax-exempt entities. Use code “H” and the amount if your employees contribute to 501(c) (18) (D).
I Not in use currently.
J Use this code if you have a third-party-provided sick pay plan. Employers use it when their employees contribute to a sick pay plan from a third party and the income is not taxable for them.
K This code denotes a 20% excise tax on excess golden parachute payments used by large corporations undergoing mergers. List this amount on Form 1040 Schedule 2, line 17k.
L Report Substantiated employee business expense reimbursem*nt through this code if these expenses are non-taxable. Taxable employee expenses should be reported separately on Form 2106.
M Use this code to report the uncollected social security and RRTA tax from former employees only. Use this if the total taxable cost of group life insurance is above $50,000.
N This code is used for uncollected Medicare tax on taxable costs of group-term insurance plans from former employees only. Use this if the taxable cost exceeds $50,000.
P This Code is used for reporting the excludable moving expense reimbursem*nts made to the members of the US armed forces only.
Q For non-taxable combat pay, only for armed personnel.
R Employer contributions for the Archer Medical Savings Account for their employees will be reported using code “R” in box 12. The portion of gross pay not excluded for these contributions should be reported on boxes 1,3 and 5.
S Use code “S” and report the amount in box 12 if your employee contributes to a SIMPLE retirement plan and not to 401(k).
T Report the total amount of adoption plans for your employees in box 12 using code “T”. Also, include the portion of employee contributions to a 125-adoption plan.
V An Employer will report the income from non-statutory stocks by calculating the difference between the fair market value of the stocks and the amount paid by the employee. Publication 525 offers more guides on reporting taxable and nontaxable income for this section.
W An employer will report the contribution amount of a Health Savings Account (HSA) in box 12. This should include the amount contributed by the employee.
Y This code is used for deferrals under section 409A of the nonqualified deferral program regardless if the deferrals are part of the income or not.
Z This code represents income that does not qualify under section 409A. This amount is subject to an additional tax of 20% plus interest for your employee’s Form 1040.
AA Employers will use code “AA” to designate Roth contributions under section 401 (k). Report the employee contributed amount in box 12 but it is not taxable. Employers can claim the Saver’s Tax credit though.
BB Report designated Roth contributions under section 403(b) with code “BB”. It is not taxable but employers can claim the Saver’s Tax credit. Write the contributed amount by an employee in box 12.
CC Currently not in Use.
DD Employers will use code “DD” to write the amount contributed for the Employer-Sponsored health coverage for their employees. This cost is for information purposes only and not taxable for the employees.
EE It will be used for designated Roth contributions under a governmental plan 457(b). This amount should not include the tax-exempt organization’s contributions under section 457(b) plan.
FF It is used by employers under the definition of permitted small employer health insurance reimbursem*nt plans for information purposes only. The amount is non-taxable.
GG It denotes income from qualified equity grants under section 83(i). This amount is includable in the gross income section under section 83(i) (1) (A) for an employee in wages box 1. The amount written in box 12 is for information only.
HH Employers will use Code “HH” in box 12 for aggregate deferrals under section 83(i) elections at the year-end. This amount is also non-taxable.
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