September 01, 2010
Tip of the Week: Reporting Health Insurance Costs on Form W-2 Does not Affect Taxability
Filed under: News
Vision Payroll

Taxability of Health Care Costs not Impacted by Form W-2 ReportingMany employers are aware of the new requirement under the Patient Protection and Affordable Care Act (PPACA), soon to be implemented, that an employer’s health insurance costs be included on an employee’s Form W-2.

Reporting Health Care Costs on Form W-2 Does NOT Make Them Taxable

Many have misunderstood this requirement to mean that an employer’s health insurance costs are taxable to the employee. To help clarify this, the Internal Revenue Service (IRS) recently released the following explanation:

Starting in tax year 2011, the [PPACA] requires employers to report the value of the health insurance coverage they provide employees on each employee’s annual Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income and it is not taxable.

Health Care Costs That Were Already Taxable Are Still Taxable

In some circumstances, the employer’s cost of health insurance is included in an employee’s income, e.g., certain S corporation shareholders. This change does not affect the taxability of employer’s costs that were already taxable.

Vision Payroll Is Ready to Implement This Change

Contact Vision Payroll if you have any further questions on Form W-2.


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