Do you truly understand your W-2 earnings statement? A common question we get here at DirectPay Payroll Services is “Why don’t the gross wages on my last pay stub of the year match box 1 of my W-2”? The reason for this is simple, if your wages include non-taxable income, the non-taxable income will not be included on your W-2. Items such as 401K and Simple IRA contributions will be included in gross wages on your check stub, but will not be included as federal or state wages on your W-2. However, fully non-taxable items such as pretax health insurance will not show on your W-2 at all.

How about that lower region of your W-2? You know, the part of your W-2 with all the strange boxes, amounts and codes? What does all of that mean? Certain employer benefits and employee deductions need to be listed on your W-2 for reporting purposes, other items may just be listed as an informational memo. Below is a listing of the boxes and codes used on form W-2. You can also find this information on the back of your W-2 or at www.irs.gov

Box a—Employee’s social security number. Enter the number shown on the employee’s social security card.   If the employee does not have a card, he or she should apply for one by completing Form SS-5, Application for a Social Security Card. The SSA lets you verify employee names and SSNs online or by telephone. For information about these free services, visit the Employer W-2 Filing Instructions & Information website at www.socialsecurity.gov/employer. If you have questions about using these services, call 1-888-772-6270 (toll free) to speak with an employer reporting specialist at the SSA.   If the employee has applied for a card but the number is not received in time for filing, enter “Applied For” in box a on paper Forms W-2 filed with the SSA. If e-filing, enter zeros (000-00-0000 if creating forms online or 000000000 if uploading a file).   Ask the employee to inform you of the number and name as they are shown on the social security card when it is received. Then correct your previous report by filing Form W-2c showing the employee’s SSN. If the employee needs to change his or her name from that shown on the card, the employee should call the SSA at 1-800-772-1213.      If you do not provide the correct employee name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. For more information, see Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs.

Box b—Employer identification number (EIN). Show the employer identification number (EIN) assigned to you by the IRS (00-0000000). This should be the same number that you used on your federal employment tax returns (Form 941, Form 943, Form 944, Form CT-1, or Schedule H (Form 1040)). Do not use a prior owner’s EIN. If you do not have an EIN when filing Forms W-2, enter “Applied For” in box b; do not use your SSN. You can get an EIN by applying online at IRS.gov, by calling the toll free number, 1-800-829-4933, or by filing Form SS-4, Application for Employer Identification Number. Also see Agent reporting on page 3.
Box c—Employer’s name, address, and ZIP code. This entry should be the same as shown on your Form 941, Form 943, Form 944, Form CT-1, or Schedule H (Form 1040). The U.S. Postal Service recommends that no commas or periods be used in return addresses. Also see Agent reporting on page 3.
Box d—Control number. You may use this box to identify individual Forms W-2. You do not have to use this box.
Boxes e and f—Employee’s name and address. Enter the name as shown on your employee’s social security card (first name, middle initial, last name). If the name does not fit in the space allowed on the form, you may show the first and middle name initials and the full last name. It is especially important to report the exact last name of the employee. If you are unable to determine the correct last name, use of the SSA’s SSNVS may be helpful. Separate parts of a compound name with either a hyphen or a blank. Do not join them into a single word. Include all parts of a compound name in the appropriate name field. For example, for the name “John R Smith-Jones”, enter “Smith-Jones” or “Smith Jones” in the last name field. If the name has changed, the employee must get a corrected social security card from any SSA office. Use the name on the original card until you see the corrected card. Do not show titles or academic degrees, such as “Dr.,” “RN,” or “Esq.,” at the beginning or end of the employee’s name. Generally, do not enter “Jr.,” “Sr.,” or other suffix in the “Suff.” box on Copy A unless the suffix appears on the card. However, the SSA still prefers that you do not enter the suffix on Copy A.    Include in the address the number, street, and apartment or suite number (or P.O. box number if mail is not delivered to a street address). The U.S. Postal Service recommends that no commas or periods be used in delivery addresses. For a foreign address, give the information in the following order: city, province or state, and country. Follow the country’s practice for entering the postal code. Do not abbreviate the country name.   Third-party payers of sick pay filing third-party sick pay recap Forms W-2 and W-3 must enter “Third-Party Sick Pay Recap” in place of the employee’s name in box e. Also, do not enter the employee’s SSN in box a. See Sick Pay Reporting in section 6 of Pub. 15-A.
Box 1—Wages, tips, other compensation. Show the total taxable wages, tips, and other compensation (before any payroll deductions) that you paid to your employee during the year. However, do not include elective deferrals (such as employee contributions to a section 401(k) or 403(b) plan) except section 501(c)(18) contributions. Include the following.

  1. Total wages, bonuses (including signing bonuses), prizes, and awards paid to employees during the year. See Calendar year basis on page 7.
  2. Total noncash payments, including certain fringe benefits. See Fringe benefits on page 5.
  3. Total tips reported by the employee to the employer (not allocated tips).
  4. Certain employee business expense reimbursements (see Employee business expense reimbursements on page 5).
  5. The cost of accident and health insurance premiums for 2%-or-more shareholder-employees paid by an S corporation.
  6. Taxable benefits from a section 125 (cafeteria) plan if the employee chooses cash.
  7. Employee contributions to an Archer MSA.
  8. Employer contributions to an Archer MSA if includible in the income of the employee. See Archer MSA on page 4.
  9. Employer contributions for qualified long-term care services to the extent that such coverage is provided through a flexible spending or similar arrangement.
  10. Taxable cost of group-term life insurance in excess of $50,000. See Group-term life insurance on page 5.
  11. Unless excludable under Educational assistance programs (see page 5), payments for non-job-related education expenses or for payments under a nonaccountable plan. See Pub. 970.
  12. The amount includible as wages because you paid your employee’s share of social security and Medicare taxes. See Employee’s social security and Medicare taxes paid by employer on page 5. If you also paid your employee’s income tax withholding, treat the grossed-up amount of that withholding as supplemental wages and report those wages in boxes 1, 3, 5, and 7. No exceptions to this treatment apply to household or agricultural wages.
  13. Designated Roth contributions made under a section 401(k) plan or under a section 403(b) salary reduction agreement. See Designated Roth contributions on page 5.
  14. Distributions to an employee or former employee from an NQDC plan (including a rabbi trust) or a nongovernmental section 457(b) plan.
  15. Amounts includible in income under section 457(f) because the amounts are no longer subject to a substantial risk of forfeiture.
  16. Payments to statutory employees who are subject to social security and Medicare taxes but not subject to federal income tax withholding must be shown in box 1 as other compensation. See Statutory employee on page 11.
  17. Cost of current insurance protection under a compensatory split-dollar life insurance arrangement.
  18. Employee contributions to a health savings account (HSA).
  19. Employer contributions to an HSA if includible in the income of the employee. See Health savings account (HSA) on page 5.
  20. Amounts includible in income under an NQDC plan because of section 409A. See Nonqualified deferred compensation plans on page 6.
  21. Payments made to former employees while they are on active duty in the Armed Forces or other uniformed services.
  22. All other compensation, including certain scholarship and fellowship grants (see page 6). Other compensation includes taxable amounts that you paid to your employee from which federal income tax was not withheld. You may show other compensation on a separate Form W-2. See Multiple forms on page 7.
Box 2—Federal income tax withheld. Show the total federal income tax withheld from the employee’s wages for the year. Include the 20% excise tax withheld on excess parachute payments. See Golden parachute payments on page 5.
Box 3—Social security wages. Show the total wages paid (before payroll deductions) subject to employee social security tax but not including social security tips and allocated tips. If reporting these amounts in a subsequent year (due to lapse of risk of forfeiture), the amount must be adjusted by any gain or loss. See Box 7—Social security tips and Box 8—Allocated tips on page 9. Generally, noncash payments are considered to be wages. Include employee business expense reimbursements reported in box 1. If you paid the employee’s share of social security and Medicare taxes rather than deducting them from wages, see Employee’s social security and Medicare taxes paid by employeron page 5. The total of boxes 3 and 7 cannot exceed $106,800 (2011 maximum social security wage base).   Report in box 3 elective deferrals to certain qualified cash or deferred compensation arrangements and to retirement plans described in box 12 (codes D, E, F, G, and S) even though the deferrals are not includible in box 1. Also report in box 3 designated Roth contributions made under a section 401(k) plan, under a section 403(b) salary reduction agreement, or under a governmental section 457(b) plan described in box 12 (codes AA, BB, and EE).   Amounts deferred (plus earnings or less losses) under a section 457(f) or nonqualified plan or nongovernmental section 457(b) plan must be included in boxes 3 and/or 5 as social security and/or Medicare wages as of the later of when the services giving rise to the deferral are performed or when there is no substantial forfeiture risk of the rights to the deferred amount. Include both elective and nonelective deferrals for purposes of nongovernmental section 457(b) plans.

Wages reported in box 3 include:

  • Signing bonuses an employer pays for signing or ratifying an employment contract. See Rev. Rul. 2004-109, 2004-50 I.R.B 958, available at www.irs.gov/irb/2004-50_IRB/ar07.html.
  • Taxable cost of group-term life insurance over $50,000 included in box 1. See Group-term life insurance on page 5.
  • Cost of accident and health insurance premiums for 2%-or-more shareholder-employees paid by an S corporation, but only if not excludable under section 3121(a)(2)(B).
  • Employee and nonexcludable employer contributions to an MSA or HSA. However, do not include employee contributions to an HSA that were made through a cafeteria plan. See Archer MSA on page 4 and Health savings account (HSA) on page 5.
  • Employee contributions to a SIMPLE retirement account.
    See SIMPLE retirement account on page 6.
  • Adoption benefits. See Adoption benefits on page 3.
Box 4—Social security tax withheld. Show the total employee social security tax (not your share) withheld, including social security tax on tips. For 2011, the amount should not exceed $4,485.60 ($106,800 × 4.2%). Include only taxes withheld (or paid by you for the employee) for 2011 wages and tips. If you paid your employee’s share, see Employee’s social security and Medicare taxes paid by employer on page 5.
Box 5—Medicare wages and tips. The wages and tips subject to Medicare tax are the same as those subject to social security tax (boxes 3 and 7) except that there is no wage base limit for Medicare tax. Enter the total Medicare wages and tips in box 5. Be sure to enter tips that the employee reported even if you did not have enough employee funds to collect the Medicare tax for those tips. See Box 3—Social security wages on page 8 for payments to report in this box. If you paid your employee’s share of taxes, see Employee’s social security and Medicare taxes paid by employer on page 5.   If you are a federal, state, or local governmental agency with employees paying only the 1.45% Medicare tax, enter the Medicare wages in this box. See Government employers on page 5.

Example of how to report social security and Medicare wages.

You paid your employee $140,000 in wages. Enter in box 3 (social security wages) 106800.00 but enter in box 5 (Medicare wages and tips) 140000.00. There is no limit on the amount reported in box 5. If the amount of wages paid was $106,800 or less, the amounts entered in boxes 3 and 5 would be the same.

Box 6—Medicare tax withheld. Enter the total employee Medicare tax (not your share) withheld. Include only tax withheld for 2011 wages and tips. If you paid your employee’s share of the taxes, see Employee’s social security and Medicare taxes paid by employer on page 5.
Box 7—Social security tips. Show the tips that the employee reported to you even if you did not have enough employee funds to collect the social security tax for the tips. The total of boxes 3 and 7 should not be more than $106,800 (the maximum social security wage base for 2011). Report all tips in box 1 along with wages and other compensation. Include any tips reported in box 7 in box 5 also.
Box 8—Allocated tips. If you are a food or beverage establishment, show the tips allocated to the employee. See the Instructions for Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Do not include this amount in boxes 1, 3, 5, or 7.
Box 9. Do not enter an amount in box 9.
Box 10—Dependent care benefits. Show the total dependent care benefits under a dependent care assistance program (section 129) paid or incurred by you for your employee. Include the fair market value (FMV) of care in a daycare facility provided or sponsored by you for your employee and amounts paid or incurred for dependent care assistance in a section 125 (cafeteria) plan. Report all amounts paid or incurred (regardless of any employee forfeitures), including those in excess of the $5,000 exclusion. This may include (a) the FMV of benefits provided in kind by the employer, (b) an amount paid directly to a daycare facility by the employer or reimbursed to the employee to subsidize the benefit, or (c) benefits from the pre-tax contributions made by the employee under a section 125 dependent care flexible spending account. Include any amounts over $5,000 in boxes 1, 3, and 5. For more information, see Pub. 15-B.

An employer that amends its cafeteria plan to provide a grace period for dependent care assistance may continue to rely on Notice 89-111 by reporting in box 10 of Form W-2 the salary reduction amount elected by the employee for the year for dependent care assistance (plus any employer matching contributions attributable to dependent care). Also see Notice 2005-42, 2005-23 I.R.B. 1204, available at www.irs.gov/irb/2005-23_IRB/ar11.html.

Box 11—Nonqualified plans. The purpose of box 11 is for the SSA to determine if any part of the amount reported in box 1 or boxes 3 and/or 5 was earned in a prior year. The SSA uses this information to verify that they have properly applied the social security earnings test and paid the correct amount of benefits.    Show distributions to an employee from a nonqualified plan or a nongovernmental section 457(b) plan. Also report these distributions in box 1. Make only one entry in this box. Distributions from governmental section 457(b) plans must be reported on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., not in box 1 of Form W-2.   If you did not make distributions this year, show deferrals (plus earnings or less losses) under a nonqualified or any section 457(b) plan that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. Also report these amounts in boxes 3 (up to the social security wage base) and 5. Do not report in box 11 deferrals included in boxes 3 and/or 5 and deferrals for current year services (such as those with no risk of forfeiture).

If you made distributions and also are reporting any deferrals in box(es) 3 and/or 5, do not complete box 11. See Pub. 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for instructions on reporting these and other kinds of compensation earned in prior years. However, do not file Form SSA-131 if this situation applies but the employee will not be age 62 or older by the end of that year.   Unlike qualified plans, NQDC plans do not meet the qualification requirements for tax-favored status for this purpose. NQDC plans include those arrangements traditionally viewed as deferring the receipt of current compensation. Accordingly, welfare benefit plans, stock option plans, and plans providing dismissal pay, termination pay, or early retirement pay are not NQDC plans.   Report distributions from NQDC or section 457 plans to beneficiaries of deceased employees on Form 1099-MISC, not on Form W-2.    Military employers must report military retirement payments on Form 1099-R.

Do not report special wage payments, such as accumulated sick pay or vacation pay, in box 11. For more information on reporting special wage payments, see Pub. 957.

Box 12—Codes. Complete and code this box for all items described below. Note that the codes do not relate to where they should be entered in boxes 12a through 12d on Form W-2. For example, if you are only required to report code D in box 12, you can enter code D and the amount in box 12a of Form W-2. Report in box 12 any items that are listed as codes A through EE. Do not report in box 12 section 414(h)(2) contributions (relating to certain state or local government plans). Instead, use box 14 for these items and any other information that you wish to give to your employee. For example, union dues and uniform payments may be reported in box 14.

On Copy A (Form W-2), do not enter more than four items in box 12. If more than four items need to be reported in box 12, use a separate Form W-2 to report the additional items (but enter no more than four items on each Copy A (Form W-2)). On all other copies of Form W-2 (Copies B, C, etc.), you may enter more than four items in box 12 when using an approved substitute Form W-2. See Multiple forms on page 7.   Use the IRS code designated below for the item you are entering, followed by the dollar amount for that item. Even if only one item is entered, you must use the IRS code designated for that item. Enter the code using a capital letter(s). Use decimal points but not dollar signs or commas. For example, if you are reporting $5,300.00 in elective deferrals under a section 401(k) plan, the entry would be D 5300.00 (not A 5300.00 even though it is the first or only entry in this box). Report the IRS code to the left of the vertical line in boxes 12a through 12d and the money amount to the right of the vertical line.   See the Form W-2 Reference Guide for Box 12 Codes on page 13. See also the detailed instructions below for each code.

Code A—Uncollected social security or RRTA tax on tips.

Show the employee social security or Railroad Retirement Tax Act (RRTA) tax on all of the employee’s tips that you could not collect because the employee did not have enough funds from which to deduct it. Do not include this amount in box 4.

Code B—Uncollected Medicare tax on tips.

Show the employee Medicare tax or RRTA Medicare tax on tips that you could not collect because the employee did not have enough funds from which to deduct it. Do not include this amount in box 6.

Code C—Taxable cost of group-term life insurance over $50,000.

Show the taxable cost of group-term life insurance coverage over $50,000 provided to your employee (including a former employee). See Group-term life insurance on page 5. Also include this amount in boxes 1, 3 (up to the social security wage base), and 5.

Codes D through H, S, Y, AA, BB, and EE.

Use these codes to show elective deferrals and designated Roth contributions made to the plans listed. Do not report amounts for other types of plans. See the example for reporting elective deferrals under a section 401(k) plan on page 10.

The amount reported as elective deferrals and designated Roth contributions is only the part of the employee’s salary (or other compensation) that he or she did not receive because of the deferrals or designated Roth contributions. Only elective deferrals and designated Roth contributions should be reported in box 12 for all coded plans; except, when using code G for section 457(b) plans, include both elective and nonelective deferrals.

For employees who were 50 years of age or older at any time during the year and made elective deferral and/or designated Roth “catch-up” contributions, report the elective deferrals and the elective deferral “catch-up” contributions as a single sum in box 12 using the appropriate code, and the designated Roth contributions and designated Roth “catch-up” contributions as a single sum in box 12 using the appropriate code.

 

If any elective deferrals, salary reduction amounts, or nonelective contributions under a section 457(b) plan during the year are makeup amounts under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) for a prior year, you must enter the prior year contributions separately. Beginning with the earliest year, enter the code, the year, and the amount. For example, elective deferrals of $2,250 for 2009 and $1,250 for 2010 under USERRA under a section 401(k) plan are reported in box 12 as follows:

D 09 2250.00, D 10 1250.00. A 2011 contribution of $7,000 does not require a year designation; enter it as D 7000.00. Report the code (and year for prior year USERRA contributions) to the left of the vertical line in boxes 12a through 12d.The following are not elective deferrals and may be reported in box 14, but not in box 12.

  • Nonelective employer contributions made on behalf of an employee.
  • After-tax contributions that are not designated Roth contributions, such as voluntary contributions to a pension plan that are deducted from an employee’s pay. See the instructions on page 11 in codes AA, BB, and EE for reporting designated Roth contributions.
  • Required employee contributions.
  • Employer matching contributions.

 

Code D—Elective deferrals under section 401(k) cash or deferred arrangement (plan).

Also show deferrals under a SIMPLE retirement account that is part of a section 401(k) arrangement.

 

Example of reporting excess elective deferrals and designated Roth contributions under a section 401(k) plan.For 2011, Employee A (age 45) elected to defer $18,300 under a section 401(k) plan. The employee also made a designated Roth contribution to the plan of $1,000, and made a voluntary (non-Roth) after-tax contribution of $600. In addition, the employer, on A’s behalf, made a qualified nonelective contribution of $2,000 to the plan and a nonelective profit-sharing employer contribution of $3,000.

Even though the 2011 limit for elective deferrals and designated Roth contributions is $16,500, the employee’s total elective deferral amount of $18,300 is reported in box 12 with code D (D 18300.00). The designated Roth contribution is reported in box 12 with code AA (AA 1000.00). The employer must separately report the actual amounts of $18,300 and $1,000 in box 12 with the appropriate codes. The amount deferred in excess of the limit is not reported in box 1. The return of excess salary deferrals and excess designated contributions, including earnings on both, is reported on Form 1099-R.

The $600 voluntary after-tax contribution may be reported in box 14 (this is optional) but not in box 12. The $2,000 nonelective contribution and the $3,000 nonelective profit-sharing employer contribution are not required to be reported on Form W-2, but may be reported in box 14.

Check the “Retirement plan” box in box 13.

 

Code E—Elective deferrals under a section 403(b) salary reduction agreement.

Code F—Elective deferrals under a section 408(k)(6) salary reduction SEP.

Code G—Elective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental section 457(b) deferred compensation plan.

Do not report either section 457(b) or section 457(f) amounts that are subject to a substantial risk of forfeiture.

Code H—Elective deferrals under section 501(c)(18)(D) tax-exempt organization plan.

Be sure to include this amount in box 1 as wages. The employee will deduct the amount on his or her Form 1040.

Code J—Nontaxable sick pay.

Show any sick pay that was paid by a third-party and was not includible in income (and not shown in boxes 1, 3, and 5) because the employee contributed to the sick pay plan. Do not include nontaxable disability payments made directly by a state.

Code K—20% excise tax on excess golden parachute payments.

If you made excess “golden parachute” payments to certain key corporate employees, report the 20% excise tax on these payments. If the excess payments are considered to be wages, report the 20% excise tax withheld as income tax withheld in box 2.

Code L—Substantiated employee business expense reimbursements.

Use this code only if you reimbursed your employee for employee business expenses using a per diem or mileage allowance and the amount that you reimbursed exceeds the amount treated as substantiated under IRS rules. See Employee business expense reimbursements on page 5.

Report in box 12 only the amount treated as substantiated (such as the nontaxable part). Include in boxes 1, 3 (up to the social security wage base), and 5 the part of the reimbursement that is more than the amount treated as substantiated.

Code M—Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (for former employees).

If you provided your former employees (including retirees) more than $50,000 of group-term life insurance coverage for periods during which an employment relationship no longer exists, enter the amount of uncollected social security or RRTA tax on the coverage in box 12. Also see Group-term life insurance on page 5.

Code N—Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (for former employees).

If you provided your former employees (including retirees) more than $50,000 of group-term life insurance coverage for periods during which an employment relationship no longer exists, enter the amount of uncollected Medicare tax or RRTA Medicare tax on the coverage in box 12. Also see Group-term life insurance on page 5.

Code P—Excludable moving expense reimbursements paid directly to employee.

Show the total moving expense reimbursements that you paid directly to your employee for qualified (deductible) moving expenses. See Moving expenses on page 6.

Code Q—Nontaxable combat pay.

If you are a military employer, report any nontaxable combat pay in box 12.

Code R—Employer contributions to an Archer MSA.

Show any employer contributions to an Archer MSA. See Archer MSA on page 4.

Code S—Employee salary reduction contributions under a section 408(p) SIMPLE.

Show deferrals under a section 408(p) salary reduction SIMPLE retirement account. However, if the SIMPLE is part of a section 401(k) arrangement, use code D. If you are reporting prior year contributions under USERRA, see the TIP before Code D, on this page.

Code T—Adoption benefits.

Show the total that you paid or reimbursed for qualified adoption expenses furnished to your employee under an adoption assistance program. Also include adoption benefits paid or reimbursed from the pre-tax contributions made by the employee under a section 125 (cafeteria) plan. However, do not include adoption benefits forfeited from a section 125 (cafeteria) plan. Report all amounts including those in excess of the $13,360 exclusion. For more information, see Adoption benefits on page 3.

Code V—Income from the exercise of nonstatutory stock option(s).

Show the spread (that is, the fair market value of stock over the exercise price of option(s) granted to your employee with respect to that stock) from your employee’s (or former employee’s) exercise of nonstatutory stock option(s). Include this amount in boxes 1, 3 (up to the social security wage base), and 5.

This reporting requirement does not apply to the exercise of a statutory stock option, or the sale or disposition of stock acquired pursuant to the exercise of a statutory stock option. For more information about the taxability of employee stock options, see Pub. 15-B.

Code W—Employer contributions to a health savings account (HSA).

Show any employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to an HSA. See Health savings account (HSA) on page 5.

Code Y—Deferrals under a section 409A nonqualified deferred compensation plan.

It is not necessary to show deferrals in box 12 with code Y. For more information, see Notice 2008-115. However, if you report these deferrals, show current year deferrals, including earnings during the year on current year and prior year deferrals. See Nonqualified deferred compensation plans on page 6.

Code Z—Income under section 409A on a nonqualified deferred compensation plan.

Enter all amounts deferred (including earnings on amounts deferred) that are includible in income under section 409A because the NQDC plan fails to satisfy the requirements of section 409A. Do not include amounts properly reported on a Form 1099-MISC, corrected Form 1099-MISC, Form W-2, or Form W-2c for a prior year. Also, do not include amounts that are considered to be subject to a substantial risk of forfeiture for purposes of section 409A. For more information, see Regulations sections 1.409A-1 through 1.409A-6 and Notice 2008-115.

The amount reported in box 12 using code Z is also reported in box 1 and is subject to an additional tax reported on the employee’s Form 1040. See Nonqualified deferred compensation plans on page 6.

For information regarding correcting section 409A errors and related reporting, see Notice 2008-113, Notice 2010-6, and Notice 2010-80.

Code AA—Designated Roth contributions under a section 401(k) plan.

Use this code to report designated Roth contributions under a section 401(k) plan. Do not use this code to report elective deferrals under code D. See Designated Roth contributions on page 5.

Code BB—Designated Roth contributions under a section 403(b) plan.

Use this code to report designated Roth contributions under a section 403(b) plan. Do not use this code to report elective deferrals under code E. See Designated Roth contributions on page 5.

Code DD—Cost of employer-sponsored health coverage.

Use this code to report the cost of employer-sponsored health coverage. The amount reported with code DD is not taxable. See Interim relief for Form W-2 reporting of the cost of group health insurance on page 1.

Code EE—Designated Roth contributions under a governmental section 457(b) plan.

Use this code to report designated Roth contributions under a governmental section 457(b) plan. Do not use this code to report elective deferrals under code G. See Designated Roth contributions on page 5.

Box 13—Checkboxes.Check all boxes that apply.

  • Statutory employee. Check this box for statutory employees whose earnings are subject to social security and Medicare taxes but not subject to federal income tax withholding. Do not check this box for common-law employees. There are workers who are independent contractors under the common-law rules but are treated by statute as employees. They are called statutory employees.
    1. A driver who distributes beverages (other than milk), or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning if the driver is your agent or is paid on commission.
    2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
    3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name if you also furnish specifications for the work to be done.
    4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity.

    For details on statutory employees and common-law employees, see section 1 in Pub. 15-A.

  • Retirement plan. Check this box if the employee was an “active participant” (for any part of the year) in any of the following.
    1. A qualified pension, profit-sharing, or stock-bonus plan described in section 401(a) (including a 401(k) plan).
    2. An annuity plan described in section 403(a).
    3. An annuity contract or custodial account described in section 403(b).
    4. A simplified employee pension (SEP) plan described in section 408(k).
    5. A SIMPLE retirement account described in section 408(p).
    6. A trust described in section 501(c)(18).
    7. A plan for federal, state, or local government employees or by an agency or instrumentality thereof (other than a section 457(b) plan).
      Generally, an employee is an active participant if covered by (a) a defined benefit plan for any tax year that he or she is eligible to participate in or (b) a defined contribution plan (for example, a section 401(k) plan) for any tax year that employer or employee contributions (or forfeitures) are added to his or her account. For additional information on employees who are eligible to participate in a plan, contact your plan administrator. For details on the active participant rules, see Notice 87-16, 1987-1 C.B. 446; Notice 98-49, 1998-2 C.B. 365; section 219(g)(5); and Pub. 590, Individual Retirement Arrangements (IRAs). You can find Notice 98-49 on page 5 of Internal Revenue Bulletin 1998-38 at www.irs.gov/pub/irs-irbs/irb98-38.pdf. Also see Notice 2000-30, which is on page 1266 of Internal Revenue Bulletin 2000-25 at www.irs.gov/pub/irs-irbs/irb00-25.pdf.