How do I comply with the new Reporting of Employer Sponsored Health Care on my W2s?
Note: This reporting is NOT required for 2011, but will be mandatory for certain employers
starting in 2012. For more information, refer to the IRS Notice 2011-28.
Continue using your Health Insurance deduction for the employee as you normally would. The reporting of the Employer Sponsored Health Care will not change what you are currently doing with your employee’s insurance AND this amount you’re reporting for the Employer Sponsored Health Care is NOT taxable and the values are NOT included in the employee’s taxable income.
If you want to set this up to be included in each payroll:
1. Setup an Additional Income category as a Fixed Amount (0.00), Omit from net and exempt from ALL taxes. Check Box 12 and enter Code DD.
2. Assign the income to all employees that receive this benefit and enter the amount paid by the employer for each employee.
The employee will see it as additional income on the check, but it won’t be included in the net and won’t be taxed. It will show on the W2 in Box 12 with Code DD – it does NOT show on the W3. If you want to set this up to be entered at year end instead of each pay period then do step 1 above. You can go ahead and do step 2 assigning it to the employee as an additional income. But it won’t be part of the checks during the year. You will enter the YTD amount in the employee setup window.