Explain The Difference Between Box 14 & 12 on an IRS Return

If you’re among the ranks of many taxpayers who work for an employer, IRS Form W-2 (Wage and Tax Statement) is a preliminary step toward filing your tax return each year. Learning how to decipher your W-2 is a journey that takes you through a series of lettered fields and numbered boxes. It’s the information contained in the numbered boxes that you’ll transfer to your tax return as you figure the amount of income tax you owe. While each box in boxes 1 through 11 displays singular sources of income, benefits and taxes withheld, boxes 12 and 14 include laundry lists of additional tax information.

The primary difference between boxes 14 and 12 on your W-2 is that box 12 uses codes to identify specific entries, including certain types of income, insurance costs, types of non-taxable pay and retirement plan contributions. Box 14, however, is somewhat of a catch-all field for your employer to report anything that doesn’t fit neatly into any other field on your W-2. Box 14 entries do not require any special codes to identify them, and employers may use any codes or descriptions they choose.

The breakdown of entries included in box 12 of the W-2 is so voluminous that the codes begin with the letter “A” and continue beyond “Z” by starting alphabetically again and doubling the letters through “H” (“AA” through “HH”). Some coded entries are reportable but not taxable to you, such as employer-sponsored health insurance (Code DD), and other entries are taxable to you, such as uncollected Social Security tax on tips (Code A) and uncollected Medicare tax on tips (Code B).

Line 14 on the W-2 may document anything from union dues to state disability insurance taxes withheld. Box 14 codes are not generated by the IRS; your employer determines these, commonly using the company's internal payroll codes. Your employer may also elect to write descriptions of these entries instead of using codes. If you’re unable to decipher the codes in this box, you’ll have to ask your employer’s payroll department or human resources representative for clarification.

When you transfer the figures on your W-2 to your tax return, you'll choose among different types of 1040 tax returns to report your income and other tax information. But beginning with the 2019 tax year, you'll be able to use only one 1040 form. This new tax return consolidates all the information from IRS Form 1040, Form 1040-A and Form 1040-EZ into one streamlined form.

Mistakes happen. When you receive your W-2 from your employer, review it to ensure its accuracy. If you find any mistakes, you'll be able to notify your employer and get a corrected copy before filing your tax return. The IRS recommends that you perform a "paycheck checkup" to make sure your employer withholds the correct amount of income tax from your paychecks. This is particularly important when there have been recent changes to tax laws, such as the Tax Cuts and Jobs Act. But it's also a valuable exercise if you experience a significant change to your tax situation such as changing jobs, increasing the size of your family or itemizing your deductions. Find this online tool by visiting IRS.gov and searching for "tax withholding calculator."