Ensures accurate withholding for state taxes. This code signals that the value of benefits such as supplemental executive retirement plans (SERPs) has been excluded from your taxable wages on the federal return but must be reported for state tax purposes or other calculations.
W2 Box 12 Code DD Meaning Guide
This ensures that the government can recapture taxes on the distributed funds when they are eventually paid out. The Mechanics of Non-Qualified Deferred Compensation Non-qualified deferred compensation plans are agreements between an employer and an employee to defer a portion of salary or bonuses to a future date, typically after retirement.
These plans are often funded through salary reduction agreements. Impact on Your Tax Filing The presence of the "dd" code does not require you to pay additional federal income tax, as the funds were never included in your federal taxable income.
Understanding W2 Box 12 Code DD for Deferred Compensation and Taxes
Because these plans do not receive the same tax-favored status, the "dd" code often appears to track the amount that was sacrificed from current taxable income to fund these future payments. Decoding Box 12: The Purpose of the Codes Box 12 of the W-2 form is designed to report various types of nontaxable income and elective deductions that reduce your taxable wages.
More About W2 box 12 dd meaning
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