What is indicated by W-2 Box 12 Code K?

The indication of W-2 Box 12 Code K is specifically related to a 20% excise tax on excess golden parachute payments. Golden parachute payments refer to substantial benefits guaranteed to top executives upon termination, usually in the context of a merger or acquisition. When these payments exceed certain thresholds as defined by tax legislation, they can incur this excise tax. The W-2 Box 12 Code K serves as a record to the IRS and taxpayers that such payments have been made, alerting them to the tax implication that needs to be addressed on their income tax return.

In contrast, the other options do not apply to Code K. Contributions to a 401(k) plan, uncollected social security tax, and health insurance premiums withheld correspond to different codes in Box 12 and represent various types of compensation or tax obligations that are unrelated to the excise tax. This specificity in coding helps ensure clarity and accuracy in reporting for taxpayers and the IRS.