If you’re responsible for managing a business with employees, you are likely familiar with Form W-2. This essential document is used to report your employees’ annual wages and tax withholding information. While it is fairly straightforward, an area of this form that often leaves filers confused is Box 12. This article will explain the purpose of W2 Box 12, what information is entered here, and why it is important.
1. What is Form W-2?
Form W-2 is an IRS annual tax return statement used by employers to report the employee and tax withholding information that includes Federal Tax, employee and employer share of Medicare, and Social Security taxes. Employers are required to distribute a copy of Form W-2 to each recipient (employees) by January 31 each year.
2. What is W-2 Box 12?
W2 Box 12 is divided into four sections, labeled as 12a, 12b, 12c, and 12d, with sub-categories ranging from A to HH. In this box, employers are able to report various miscellaneous types of income to the IRS. Some of the amounts reported in Box 12 may be taxable and included in the total wages reported elsewhere on the W-2, while others represent non-taxable amounts meant for informational purposes.
3. Instructions for Box 12 Codes on W-2
The W-2 Box 12 should contain up to four different codes ranging from ‘A to HH’. These codes are used to report different types of income.
| W2 Box 12 Codes | Description |
|---|---|
| W2 Box 12 Code A | Enter the code "A" to show the uncollected social security or RRTA tax on tips. Do not include this amount in box 4. |
| W2 Box 12 Code B | Enter the code "B" to show the uncollected Medicare tax on tips. Do not show any uncollected Additional Medicare Tax. Do not include this amount in box 6. |
| W2 Box 12 Code C | Taxable cost of group-term life insurance over $50,000 |
| W2 Box 12 Code D | Enter the code "D" to show the elective deferrals under a section 401(k) cash or deferred arrangement (plan). |
| W2 Box 12 Code E | Enter the code "E" to show the elective deferrals under a section 403(b) salary reduction agreement. |
| W2 Box 12 Code F | Enter the code "F" to show the elective deferrals under a section 408(k) (6) salary reduction Simplified Employee Pension plan (SEP). |
| W2 Box 12 Code G | Enter the code "G" to show the elective deferrals and employer contributions (including non elective deferrals) to any governmental or nongovernmental section 457(b) deferred compensation plan. |
| W2 Box 12 Code H | Enter the code "H" to show the elective deferrals under section 501(c) (18)(D) tax-exempt organization plan. |
| W2 Box 12 Code J | Enter the code “J” to show the non-taxable sick pay. |
| W2 Box 12 Code K | Enter the code “K” to show the 20% excise tax on excess golden parachute payments. |
| W2 Box 12 Code L | Substantiated employee business expense reimbursem*nts. |
| W2 Box 12 Code M | Enter the code "M" to show the uncollected social security or RRTA tax on the taxable cost of group-term life insurance over $50,000 (for former employees). |
| W2 Box 12 Code N | Enter the code "N" to show the uncollected Medicare tax on the taxable cost of group-term life insurance over $50,000 (for former employees). |
| W2 Box 12 Code P | Enter the code “P” to show the excludable moving expense reimbursem*nts paid directly to a member of the U.S. Armed Forces. |
| W2 Box 12 Code Q | Nontaxable combat pay (only for military personnel). |
| W2 Box 12 Code R | Enter the code “R” to show the employer contributions to an Archer MSA. |
| W2 Box 12 Code S | Enter the code “S” to show the Employee salary reduction contributions under a section 408(p) SIMPLE plan. |
| W2 Box 12 Code T | Enter the code “T” to show the adoption benefits. |
| W2 Box 12 Code V | Enter the code “V” to show the Income from the exercise of nonstatutory stock option(s). Include this amount in boxes 1, 3 (up to the social security wage base), and 5. |
| W2 Box 12 Code W | Enter the code “W” to show the Employer contributions to a health savings account (HSA). |
| W2 Box 12 Code Y | Enter the code “Y” to show the deferrals under section 409A on a nonqualified deferred compensation plan. |
| W2 Box 12 Code Z | Enter the code “Z” to show the income under a nonqualified deferred compensation plan that fails to satisfy section 409A. |
| W2 Box 12 Code AA | Enter the code "AA" to show the designated Roth contributions under a section 401(k) plan. |
| W2 Box 12 Code BB | Enter the code "BB" to show the Designated Roth contributions under a section 403(b) plan. |
| W2 Box 12 Code DD | Enter the code "DD" to show the cost of employer-sponsored health coverage. |
| W2 Box 12 Code EE | Enter the code “EE” to show the designated Roth contributions under a governmental section 457(b) plan. |
| W2 Box 12 Code FF | Enter the code “FF” to show the permitted benefits under a qualified small employer health reimbursem*nt arrangement. The maximum reimbursem*nt for an eligible employee for 2022 is $5,450 and $11,050 for families. |
| W2 Box 12 Code GG | Enter the code “GG” to show the Income from qualified equity grants under section 83(i). |
| W2 Box 12 Code HH | Enter the code “HH” to show the aggregate deferrals under section 83(i) elections as of the close of the calendar year. |
4. How to File Form W-2 with TaxBandits
TaxBandits offers an easy and straightforward e-filing solution designed to meet the needs of tax professionals and businesses of all sizes. With TaxBandits, you can:
- File multiple W-2s using bulk upload features.
- Distribute recipient copies either through postal mail or online access.
- Ensure compliance with both Federal and State filing requirements.
- Our internal Audit Feature uses the IRS Business Rules to check your forms and ensure accurate filing.
TaxBandits provides a comprehensive solution to simplify the W-2 filing process, saving you time and reducing the risk of errors.
