What do Designated Roth contributions under a section 401(k) plan correspond to in Box 12 Codes?

Designated Roth contributions made under a section 401(k) plan are reported using Box 12 of the Form W-2 with the code "AA." This specific code is used to indicate that contributions were made to a Roth 401(k) account, differentiating them from traditional 401(k) contributions.

The reason for using code "AA" is to ensure that the contributions are clearly identified for tax purposes. Roth contributions are made on an after-tax basis, which means that they are not tax-deductible in the year they are made. However, the key benefit is that qualified withdrawals, including earnings, are tax-free when taken in retirement, provided certain conditions are met.

Using the correct code is essential for both employers and employees to accurately report contributions and ensure compliance with IRS regulations. Properly reporting these amounts helps avoid confusion during tax-filing season and assists employees in understanding their retirement savings.

Other codes listed do not pertain specifically to designated Roth contributions under a section 401(k) plan, which reinforces why "AA" is the correct choice.