3 W-2 Traps That Could Cost High Earners Thousands (Don’t File Yet!)

January has just ended. If you haven’t already checked your mailbox or your secure employee portal, your W-2 is likely waiting for you now.

For most, the instinct is to simply take that form, plug the numbers into TurboTax, and call it a day. In the past, that might have worked fine. As your income increases—especially if you work in the tech sector with equity compensation—this single form becomes a financial minefield.

Today, I want to walk you through three specific “traps” hidden on your W-2. These are the codes and boxes that -tax software often misses. And unfortunately, if you miss them, you could end up overpaying the IRS by thousands of dollars.

Here is what you need to look for before you file.

Trap #1: The “Double Tax” RSU Trap

This is the single most expensive mistake we see with our high-net-worth clients.

The Scenario: If you had Restricted Stock Units (RSUs) vest in 2025, or if you exercised Non-Qualified Stock Options (NQSOs), that income is already included in Box 1 of your W-2.

The Trap: You will also receive a Form 1099-B from your brokerage firm (like E*Trade, Fidelity, or Schwab) when you sell those shares. The problem is that the brokerage firm often reports your “Cost Basis” as $0. That’s because they don’t know that the income was already processed through your company’s payroll.

The Result: If you just hand these two forms to a tax preparer who doesn’t understand equity compensation, or if you enter them blindly into software, you will pay tax on that money twice.

1. Once as wages on your W-2.
2. Once again as 100% capital gains on your 1099-B.

The Fix: You must manually adjust the cost basis on Form 8949 (which rolls up into Schedule D) to match the income that was already taxed on your W-2. Do not let the IRS double-dip on your earnings.

Trap #2: The “Secret Codes” in Box 12

Box 12 often looks like alphabet soup, but there are two codes here that directly impact your wallet.

Code V: Exercise of Non-Statutory Stock Options

Seeing Code V is actually a good sign. It confirms that the “spread” from your NQSO exercise was correctly added to your wages. If you exercised options last year and this box is empty, you are likely under-withheld and heading for a surprise tax bill in April.

Code W: The HSA Contribution Trap

This code stands for Health Savings Account (HSA) contributions. The Warning: Many people see this number and assume it represents only the “free money” their employer put into their account. It does not.

Code W represents the combined total of your employer’s contribution AND your own pre-tax payroll deferrals.

You need to compare the total amount in Box 12 Code W against the 2025 IRS contribution limits:

• $4,300 for self-only coverage.
• $8,550 for family coverage.

If the amount for Code W is lower than these limits, you still have room to make a direct contribution before April 15th to lower your taxable income further. Since HSAs roll over year-to-year (unlike FSAs), topping this off is one of the most efficient tax moves you can make.

Trap #3: The “Job-Hopper” Refund

Did you switch companies in 2025? If so, you may be eligible for what I call the “Job-Hopper Refund.”

Social Security tax is a flat 6.2% rate, but it stops once you earn $176,100 (2025 wage base). That means the maximum Social Security tax any American should have paid for the 2025 tax year is $10,918.

The Trap: When you started your new job mid-year, your new payroll department didn’t know how much tax you had already paid at your old job. So, they started the clock over at zero and withheld the full 6.2% again.

If you earned over the limit between your two jobs, you likely paid that $10,918 cap twice.

The Fix: Do not call your HR department—they cannot fix this for you. This overpayment is claimed as a credit on your personal tax return (Schedule 3). But you have to know to look for it. Double-check Box 4 on all your W-2s. If the total is greater than $10,918, the IRS owes you the difference.

Complexity Multiplies Risk

We’ve only covered three lines on a single form. When you add in Employee Stock Purchase Plans (ESPPs), Incentive Stock Options (ISOs), and multi-state tax filings, complexity multiplies quickly.

If you are looking at your W-2s and feeling unsure if you are set up correctly for the year ahead, don’t just hope for the best. The cost of guessing wrong is simply too high.

If you need a professional set of eyes on your situation, we work with high-income earners every day to turn these complex equity packages into a clear tax strategy.