Dr Doctor, I am sending this email because of new IRS rules on reimbursement to employees toward health insurance.

Recently we have found out that beginning 2014 any employer who reimburses an employee or pays an employee directly money for purchasing their own health insurance must include these amounts in W-2 gross wages. It has been determined that this is now considered an illegal health insurance plan per the Affordable Care Act, Obamacare.


Therefore if you are reimbursing your employees for health insurance (through payroll or other means), you have to make sure you get your employee's health insurance reimbursement dollars on the employee's W-2's. The employer needs to add any reimbursement or other money toward and employees own health insurance in gross wages but no net check. In other words work with your payroll firm to make sure the employee does not receive a net check as you have already paid the employee for these costs. You do have to pay payroll taxes on the amounts. If you have a group insurance plan that is Obamacare qualified this does not apply to you.

Mechanically you need to add up the amounts you have been reimbursing your employees or paying your employees directly through Dec. 31, 2014 and put the total for 2014 it on the W-2 for each employee. This amount must be added to Gross Wages of each employee and you or your payroll company will have to calculate the payroll taxes that are associated with that income.

If you fail to do this the penalties are $100/employee/day if this amount is not included on the W-2. So an example of 1 employee's penalties if you miss it is $36,500 ($100/day x 365 days/year).

As these IRS and ACA (Affordable Healthcare Act) issues and rules are issued and updated I will continue to let you know.

If you have any questions please feel free to call me here at the office.  Thank you.



Monica Rebella, CPA/IAR
507 E. First Street #A
Tustin,CA 92780
ph (714) 619-0667
Fax (714) 544-0236
email: mrebella@rebellacpa.com

This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.


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