Issue

We continue to hear from higher education institutions with questions about several W-2 issues – foremost are health coverage reporting and the new deadlines.  This “Tax Tips” should serve as a “heads up” on both of those issues.

Situation

Saltwater Christian College (SCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  They are required to file Form 990 annually.  After attending our year-end webcast, they call to ask about what – if any – issues they may need to be aware of as they plan for 2016 Form W-2 filing.

We note that because they file more than 250 Form W-2s, they have the requirement to report “applicate employer-provided coverage” of health costs in Box 12 (with a DD code) and the new filing deadline of January 31, 2017 for BOTH employee and IRS filing of Forms W-2/W-3.

**Note that for “small employers” – those who filed fewer 250 or fewer Form W-2s in the tax year – this reporting is optional until the IRS issues formal guidance for these employers.

Rules

From the IRS webpage, “Form W-2 Reporting of Employer-Sponsored Health Coverage”:

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.

Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.

Reporting on the Form W-2

Employers that are subject to this requirement should report the value of the health care coverage in Box 12 of the Form W-2, with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart, below, and the questions and answers (linked to on the link below) for more information.

An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.  Click here for more information.

From the 2016 General Instructions for Forms W-2 and W-3:

What’s New: New due date for filing with SSA. The due date for filing 2016 Forms W-2, W-2AS, W-2CM, W-2GU, W-2VI, W-3 and W-3SS with the SSA is now January 31, 2017, whether you file using paper forms or electronically.

Bottom Line

Every year, it seems there are “tweaks” and “nuances” to Form W-2 filings in January (employee deadline) and February (IRS deadline – NOW January).  The 2017 filing season (for 2016 returns) is no different. It would be good to run your W-2 questions by your skilled, knowledgeable, and experienced tax advisor.  He or she will be able to help your school navigate the intricacies of the reporting requirements.

Specific questions? Email Dave Moja.

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.