What does W-2 Box 12 Code S indicate?

W-2 Box 12 Code S refers specifically to "Employee salary reduction contributions." This code is used to report amounts that are deducted directly from an employee's salary for contributions to a dependent care flexible spending account (FSA). These contributions are made before tax, allowing employees to save on their taxable income while using the money for qualified dependent care expenses.

Understanding this designation is essential for both employees and tax preparers, as it helps identify contributions that may reduce the taxable income reported on the employee's tax return. This tax advantage is a significant reason employees may choose to allocate part of their salary towards dependent care expenses.

The other options listed involve different codes and designations. For example, Code S specifically pertains to salary reduction contributions for care expenses, whereas other codes represent different types of compensation or benefits with their own tax implications.