What does W-2 Box 12 Code B signify?

W-2 Box 12 Code B specifically indicates "Uncollected Medicare tax on tips." This code is used by employers to report the amount of Medicare tax that was not withheld from an employee's tips for the year. When employees receive tips, they are typically required to pay Medicare taxes on those amounts. If for any reason, such as if the tips were not reported or sufficient withholding did not occur, the employer will reflect the uncollected Medicare tax in this box.

Understanding this code is crucial for income tax reporting because it helps to ensure that individuals are aware of their tax responsibilities concerning tips. This information is particularly relevant for employees who work in service-related industries where tipping is common. Recognizing this code allows employees to accurately calculate any taxes owed and avoid potential tax penalties for underreporting income.