Will the cost of the insurance premium we pay for an employee (currently 100%) and report on the Form W-2 be subject to federal, state, or local tax for the employer and employee?
In October, the IRS released the draft 2011 Form W-2 which indicates how the health care cost will be reported in existing Box 12 and also makes it clear that this amount is not taxable income to employees. This amount will not need to be reported on the Form W-3. Certain employer contributions to discriminatory health plans may result in taxable income to the employee; however, such treatment is not a result of Form W-2 reporting requirement of PPACA. Tax structure for employee and employer contributions for the most part have not changed under the new law. The only notable exception was the expansion of the tax exclusion of adult dependents to the age of 27 under section 125 plans. This change allows more dependents covered under their parents’ employer’s section 125 plan to be excluded from tax contributions, essentially reducing tax liability.
