What a difference a letter makes

I got my W-2 forms in the mail yesterday. It used to be that I would wait until the last minute to file my federal and state returns. If you’re taxes are fairly easy to prepare and you’ve never used the online tax preparation program at www.hrblock.com, I’d recommend it. I was able to complete my taxes in around an hour or so… and nearly had a heart attack in the process.

In box 12a of my W-2, there was a fairly sizable number listed. I entered the dollar amount from box 12 in the appropriate field and read the code as being A (which I now know to be the code that designates the money as uncollected Social Security or RRTA tax on tips.) When I was done filling in all the fields, the program calculated that I owed over $2500 in federal taxes! I’m not one to swear a whole lot, but after not having breathed for a couple of minutes while staring blankly at my monitor wondering why I owed so much, I have to admit a couple of expletives parted from my lips.

Rational thinking finally took over and I went back through the form. Box 12a had a little letter ‘D’ to the left of it. This particular code means the dollar amount is a non-taxable elective salary deferral to a 401(k). Non-taxable is the operative part of the description. So, instead of owing $2500, I am getting around $350 back.

Next year I’ll be taking a closer look at line 12.

Posted by: Vonski | 01-25-2008 | 11:01 PM
Posted in: General