What is Form W-2?

Form W-2, or the Wage and Tax Statement, is the year-end document you provide to each employee and submit to the IRS. It shows total wages paid, amounts withheld for federal income tax and Social Security, additional earnings and deductions tied to employer-sponsored benefits.

You must typically provide a W-2 for any employee who earns at least $600 in a calendar year or has income, Social Security and Medicare tax withheld from their pay.

Each field has a specific purpose regarding employee wage information:

• The IRS uses this form to monitor federal tax compliance.
• Employees rely on it to file personal tax returns.
• State and local agencies may use it to determine eligibility for benefits or enforce local tax requirements.

What is Box 14?

Box 14 is an optional field used to report amounts that don’t belong in other Form W-2 boxes, such as after-tax deductions or non-taxable benefits. The IRS doesn’t mandate what’s entered here, but employees may use it to understand withholdings and reconcile their personal tax documents.

Typically, the information in Box 14 doesn’t affect an employee’s personal tax return unless they have self-employment income or claim qualified sick leave or family leave credits against self-employment income.

What do employers include under Box 14?

Employers often use this space to report values that support employees’ personal tax filings or clarify nonstandard compensation. Common examples include:

• Pre-tax contributions: Deductions for retirement plans, such as 401(k) or 403(b), flexible spending accounts or commuter benefits.
• After-tax contributions: Employers may list after-tax health savings account contributions, union dues or insurance premiums paid with post-tax dollars to help employees track annual out-of-pocket costs.
• Non-cash compensation: If an employee receives a company vehicle, housing allowance or uniform reimbursements for personal use, you might list them here for clarity even if they don’t affect taxable wages.
• Informational benefits: Some employers use Box 14 to note employer-paid tuition assistance or imputed income from domestic partner benefits that may impact employees’ eligibility for credits or deductions.
• Industry-specific taxes: For example, railroad employers might report Railroad Retirement Tax Act compensation or Tier I and II taxes to support compliance and transparency for affected workers.

W-2 form Box 14 codes

Items entered in Box 14 must typically be labeled with a code that provides a brief description of the item. Since standard codes don’t exist for Box 14, employers can choose their own to describe the reported item. Your chosen codes should be clear to prevent confusion.

Some locations have designated codes for specific state and local taxes. New York City, for example, uses the following codes:

• IRC414H for pension contributions: Denotes payroll deductions covered under IRS Code Section 414 for pension contributions.
• IRC132 for commuter benefits: Indicates payroll deductions covered under IRS Section 132 for commuter benefits.
• IMP for domestic partner benefits: Describes the taxable value of an employee’s domestic partner’s health plan coverage provided by the city or union welfare fund.
• IRC125 for pretax benefit programs: For payroll deductions covered under IRS Code Section 125 for flexible spending account programs.

Why accurate reporting in Box 14 matters

Unclear or incorrect Box 14 entries can potentially lead to questions from staff, delayed tax returns, lost deductions for employees and issues with other tax forms like Schedule SE or forms used to claim paid leave.

Here are the main reasons accurate reporting is important:

• Employee clarity: Box 14 helps employees understand how benefits and deductions affect their pay.
• State and local filing accuracy: Some states require Box 14 entries for compliance, especially regarding disability insurance, transit programs and city-level taxes.
• Year-end reconciliation: When your W-2 data matches payroll system totals, it helps reduce issues during audits or tax season.

While the IRS doesn’t audit Box 14 like wage and tax totals, incomplete or missing information can potentially cause confusion for your payroll team, employees and tax advisors.

Reporting employer-sponsored benefits in Box 14

Employer-sponsored benefits are part of employee compensation and can be reported in Box 14 of the W-2 form. These benefits may include retirement plan contributions, health insurance premiums, tuition assistance and wellness reimbursements. Understanding how these benefits are reported and their impact on taxable income is important for both employers and employees.

Contributions to a retirement plan, such as a 401(k), can reduce an employee’s federal taxable income and still be reported in Box 14 for informational purposes.

Depending on your organization, Box 14 may also include non-taxable transit benefits, uniform payments, dependent care contributions and cafeteria or meal plan participation that don’t belong in standard reporting boxes. Each item can have different tax implications, making accurate reporting essential.

Regularly reviewing Box 14 entries can help avoid inconsistencies, reduce time spent resolving employee queries and support transparent, up-to-date compensation reporting across your employees’ records.