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Decoding Form W-2 Box 12: What Do Those Letters and Numbers Mean?

By Adnan Farooqui

Published on 27 Apr 2023 6 min read

The Internal Revenue Service (IRS) Form W-2, titled Wage and Tax Statement, is a tax document filed by employers at the end of the year. It’s used to report salary information and taxes withheld from employees. It’s entirely possible to fill the Form W-2 by yourself, but chances are that you may find it a bit difficult to work out what all those Box 12 W-2 codes mean.

The completed Form W-2 is then sent to employees in January and a copy is also filed with the IRS. The entire process is quite simple but it’s important to understand what’s required so that all of the information can be reported accurately.

What is Box 12 W-2?

The IRS Form W-2 Box 12 can feel a bit overwhelming with all of its different sections and codes. It’s used to record various types of income, including taxable amounts that are declared as wages in other sections of the form, as well as non-taxable amounts to report only. 

Box 12 is further divided into four sections from 12a – 12d, not to be confused with the Box 12 W-2 codes, as these are just for the organization of the space. Codes from the letter A through HH are used in Box 12 to report miscellaneous sources of income that must be declared to the IRS.

Box 12 W-2 Instructions

There are 29 codes to report compensation and benefit amounts using Form W-2. These codes cover everything from elective deferrals to a section 401(k) to income from qualified equity grants. Enter the code in upper-case (capital letter) and its corresponding amount in Box 12. Up to four codes and amounts can be put in the different sections (12a, 12b, 12c, and 12d). 

You’ll need an additional Form W-2 if you need to report more than four. Each section of Box 12 is divided by a vertical line. Enter the code on the left of the line and the dollar amount on the right. For example, you would report an employee’s income of $10,000 from qualified equity grants as GG | 10000.00. If you’re using tax filing software to fill out Form W-2, look for the option to add another Box 12 item if you need to report more than four.

Box 12 W-2 Codes and Explanations

One of the reasons why this part of filling out Form W-2 can be so confusing is because there are so many codes and it can be difficult to understand where to report income and claim a tax write-off. 

If they’ve got you scratching your head in confusion, the following list explains every code. Bear in mind that not all alphabets are in use as these codes so you may find a couple of them missing from this list.

• A: Uncollected social security or RRTA tax on tips
  • There will be an amount here if employees collected tips and no social security tax is withheld

• B: Uncollected Medicare tax on tips (but not Additional Medicare Tax)
  • If tips were collected by employees but no Medicare taxes were withheld by you

• C: Taxable cost of group-term life insurance over $50,000
  • The amount is reported here for informational purposes only as it’s also reported in Boxes 1, 3 and 5 of the W-2

• D: Elective deferrals under a section 401(k) cash or deferred arrangement plan, including a SIMPLE 401(k)
  • Enter this code and the amount in Box 12 If your employee contributes to a 401(k) retirement plan

• E: Elective deferrals under a section 403(b) salary reduction agreement
  • This is for reporting the elective-deferral contribution made by the employee to a sponsored retirement plan

• F: Elective deferrals under a section 408(k)(6) salary reduction SEP
  • The amount reported here is the contributions made to the 408(k) simplified employee pension plan

• G: Elective deferrals and employer contributions (including nonelective deferrals) to a section 457(b) deferred compensation plan
  • This is to declare all contributions made to a section 457(b) deferred compensation retirement plan

• H: Elective deferrals to a section 501(c)(18)(D) tax-exempt organization plan
  • Declaring all contributions made by employees to a 501(c)(18)(D) organization plan

• J: Nontaxable sick pay
  • Report any sick pay paid by a third party that wasn’t includible in the income, because the employee contributed to the sick pay plan

• K: 20% excise tax on excess golden parachute payments
  • Report the excess payment made to employees who take golden parachute payments from your company

• L: Substantiated employee business expense reimbursements
  • Include the reimbursements for an employee’s nontaxable business expenses here

• M: Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (former employees only)
  • If social security or RRTA tax wasn’t collected from former employees, enter this code and the amount in Box 12

• N: Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (former employees only)
  • Report the uncollected Medicare Tax for group-term life insurance over $50,000 with this code

• P: Excludable moving expense reimbursements paid directly to members of the Armed Forces
  • This is only for members of the Armed Forces

• Q: Nontaxable combat pay
  • This is only for members of the military

• R: Employer contributions to an Archer MSA
  • If they have one, enter the amount you’ve contributed to your employee’s Archer Medical savings account

• S: Employee salary reduction contributions under a section 408(p) SIMPLE plan
  • If an employee is contributing to a SIMPLE retirement plan and not a 401(k), report the amount they’ve taken out from their salary

• T: Adoption benefits
  • If benefits are provided to employees who adopt, include the total amount in Box 12 with this code

• V: Income from exercise of nonstatutory stock option(s)
  • Report the difference in fair market value and the price paid by an employee for nonstatutory stock

• W: Employer contributions (including employee contributions through a cafeteria plan) to a health savings account
  • Enter the amount you’ve contributed to an employee’s Health Savings Account plan

• Y: Deferrals under a section 409A nonqualified deferred compensation plan
  • All amounts put into a nonqualified deferred compensation plan, whether part of the income or not, must be reported with this code

• Z: Income under a nonqualified deferred compensation plan that fails to satisfy section 409A
  • Enter the total income that doesn’t qualify for Section 409A

• AA: Designated Roth contributions under a section 401(k) plan
  • Report the employee contributions to a Roth 401(k) plan with this code in Box 12

• BB: Designated Roth contributions under a section 403(b) plan
  • Report the employee contributions to a Roth 403(b) plan with this code in Box 12

• DD: Cost of employer-sponsored health coverage
  • This non-taxable amount declares the cost of employer-sponsored healthcare coverage

• EE: Designated Roth contributions under a governmental section 457(b) plan
  • Include all Roth contributions under the 457(b) on Box 12 with this code

• FF: Permitted benefits under a qualified small employer health reimbursement arrangement
  • If you’re a small employer providing health coverage through a QSEHRA, report the benefit on every eligible employee’s W-2 with this code

• GG: Income from qualified equity grants under section 83(i)
  • Declared for informational purposes only, this is the amount includible in gross income from qualified equity grants

• HH: Aggregate deferrals under section 83(i) elections as of the close of the calendar year
  • Declared for informational purposes only, report any eligible aggregate deferrals under this code on the W-2 

doola is Your Ray of Sunshine in the Gloomy Tax Season

The Box 12 W-2 codes may make it seem daunting but it’s easy to get the hang of it once you know where everything goes. The key to making it through the tax season with your sanity intact is by making sure that your books are perfectly balanced. If your books are all over the place, you’ll find it very difficult to accurately report income and taxes, potentially leading to issues with the IRS. 

You can steer clear of that by simply using doola Bookkeeping. It’s a powerful service that takes bookkeeping completely off your plate. Every transaction is accurately tracked so that the books remain perfectly balanced. At the end of the year, simply click a button to close your books and experience a stress-free tax season like never before.

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