We’re ready for the mandated health care costs that are to be reported on your employees’ W-2s. You can get ready, too, by following these steps and watching a video on how to make the changes. The video is located at: W-2 Health Care Tax Code Setup
Changing the Health Insurance Deduction Codes
- Under Payroll/Payroll Constants, open Deduction Types and locate your
health care deduction code(s) - Edit them to remove the information in the W2 Info box and change the Tax
Code box from “Box 14” to DD - On the Parameter Titles page, in Parameter Title 5, enter “CMP AMT” (stands
for Company Amount); this is to hold the amount the employer pays for the
employee’s health care
Reflecting the new Deduction Code Requirements in Employee Maintenance
- In Employee Maintenance, go to the Deductions tab and in the Select Code
column, locate the deduction code for the health care deduction(s) that you
made in Deduction Maintenance and click it. - To “catch up the year” to reflect the amounts paid on the employee’s behalf
for the payrolls already paid during 2013, click EDIT, then enter the TOTAL
YTD HEALTH CARE paid by the employer in the CMP AMT box before
running your next payroll. - After the payroll is finished, repeat step 1 in this section, then enter the
normal amount paid on the employee’s behalf. If the employee’s status
changes during the year, change the amount in this box to the new amount
the employer pays.
What is printed on the W-2s
The Health Care Cost and the Tax Code, DD, will be printed in one of the “Box 12” boxes (there are 4 boxes available and, usually, deferred compensation or retirement is printed in the boxes). The amount printed will be a combination of the amounts your employees paid toward their health insurance and the amounts you, as the employer, paid. These two figures, added together, should equal the total amount paid to the insurance company(ies) for health insurance during the year.
Health Insurance Paid in-full by Employer; no health insurance deduction code
After calculating your W-2s for 2013, you will need to edit each W-2 to reflect the amount you, as the employer, paid for each employee’s health insurance.
Explain to your Employees what this is all about
The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits.
Helpful Links
- Affordable Care Act Tax Provisions
http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions - Questions and Answers
http://www.irs.gov/uac/Employer-Provided-Health-Coverage-Informational-Reporting-Requirements:-Questions-and-Answers - Healthcare Reform Information
http://www.unum.com/HealthCareReform/Law/201201_1.aspx - What Needs to be Reported?
http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage