« WSAU Opinion Blog

OPINION - Box 12

by Chris Conley

NEWS BLOG (WSAU)  If you haven’t received it yet, your W-2 is on the way. That’s the tax document that shows how much money you made last year. You’ll see how much money your employer paid you, how much federal tax was withheld, how much state tax was taken, and how much you paid into social security and medicaid.

There’s something new on your W-2 this year, and you should take a look at it. It’s box 12.

That’s the amount that your employer paid your fringe benefits, like health insurance. Many employees will be seeing that number for the first time on this year’s tax form. It’s probably a much higher amount than you realize.

Suppose your employer pays half of your health insurance premiums. Your share gets deducted at $140 from the paycheck you receive every other week. Your employer pays an additional $3,640 on your behalf, and, for the first time that’s being shown on your tax form. The number will also be reported to the IRS when you file form 1040, 1040-A or 1040-EZ.

You won’t be taxed on that amount, but the government wants to know what that figure is. It’ll be used to determine if your company’s insurance plan is deemed “affordable” under ObamaCare. It will also be used to calculate your employer’s penalty if they decide to drop insurance coverage at the end of the year.

There are two things you should remember about box 12. First, that’s the real cost of your health coverage. (i.e., that’s what you’d have to pay -- less any subsidies under the Affordable Care Act -- if you had to get your own insurance.)  And, secondly, there are some people in government -- many democrats and some republicans, too -- who think you should be taxed on that amount. They argue that what your employer pays for your health care is income, and shouldn’t be excluded from the income tax. Dems see getting that money into government coffers as a way to cover Obamacare’s future losses. Others wonder if, now that it’s on our W2’s, if the IRS can simply capture that amount through an administrative rule change without congressional action. (The IRS already made a less dramatic rule change this year involving the way tips are handled if a restaurant automatically adds in the gratuity. That money doesn’t go directly to the wait-staff; now it must go through the restaurant and be reported out separately on paychecks.)

Remember this: the economics behind the Affordable Care Act don’t work. The insurance industry will need more money -- higher premiums, and them some -- to be made whole. They money has to come from somewhere, and the amount that government might want from you is 28% of the amount in box 12. Be vigilant.

Image:  W2 form from irs.gov (2006)