A code K in Box 12 of a W-2 form indicates an excise tax for excess golden parachute payments, according to TurboTax. The presence of this code on a W-2 also means that the taxpayer cannot file a Form 1040EZ.
A “golden parachute,” also known as a change-of-control agreement, is an agreement compensating key executives with substantial pay and benefits in the event they lose or quit their job as a result of the company being involved in a merger or takeover, according to Investopedia. Such benefits may include severance pay, a bonus, stock options and other items as contracted.
Taxpayers who have made excess golden parachute payments must report 20 percent excise tax.