What is indicated by the BOX 12 code Z?

The code Z in Box 12 of the Form W-2 indicates income under section 409A non-qualified deferred compensation. This code is specifically used to report amounts that an employee has earned in the context of a non-qualified deferred compensation plan, which allows employees to defer income to a future date, typically for tax purposes.

Section 409A regulates how these funds must be managed and provides specific guidelines about their taxation, including the timing of distributions and potential penalties for non-compliance. The use of Box 12 code Z ensures that tax authorities are aware of this deferred compensation so they can properly assess and collect taxes at the appropriate time.

In contrast, the other options refer to different reporting codes that have distinct meanings regarding employer-sponsored benefits or retirement contributions, which do not relate to non-qualified deferred compensation. The correct identification of code Z is important for accurate reporting and compliance with IRS regulations.