HR Support on Taxing Benefits

Editor's Note: Health care reform law and same-sex marriage issues affect payroll.

Rena PirsosOverview: Most employers offer several different types of employee benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans. Whether employer and employee contributions and benefit payments received by employees are subject to withholding for certain payroll taxes, such as federal income tax (FIT), Social Security and Medicare (FICA) taxes or federal unemployment (FUTA) tax, varies among benefit types.

Trends: The following important issues will affect the taxation of employee benefits in 2015!

  • Form W-2 reporting of health insurance costs - Regarding Forms W-2, Wage and Tax Statement, that employers are required to provide to employees every January, if an employer provides group health care coverage that is not taxable to employees, it must report the aggregate cost of certain types of coverage on the employees' Forms W-2 to inform them of coverage costs.
  • Health care coverage reporting forms - The IRS has released the final instructions to Forms 1094-C and 1095-C, and Forms 1094-B and 1095-B, which employers are required to complete and file with the IRS to report on their employee health care coverage, as required by the Affordable Care Act and IRC § 6055 and § 6056.
  • Taxation of benefits provided to same-sex spouses - IRS Notice 2014-1 further clarifies the various effects of the US Supreme Court's decision in US v. Windsor and IRS Revenue Ruling 2013-17, regarding same-sex marriage, on cafeteria plans, including flexible spending arrangements and health savings accounts.
  • Supreme Court takes up same-sex marriage issue - The Supreme Court has set April 28 as the date it will hear arguments that could decide the fate of same-sex marriage nationwide. The Court will hear four consolidated cases in Obergefell v. Hodges involving same-sex marriage bans in Michigan, Ohio, Kentucky and Tennessee.

Author: Rena Pirsos, JD, Legal Editor

Latest items in Taxing Benefits

  • Internal Revenue Code Conformity by State

    Type:
    Quick Reference

    Some states that require employers to withhold income taxes from employees' wages tie their definitions of "wages" to the federal Internal Revenue Code (IRC). However, many states update their IRC references to a specific date every year or so, while others roll their references into the current version of the IRC. Even with IRC conformity, some states have important exceptions. This Quick Reference chart summarizes each state's IRC conformity reference.

  • How to Withhold on Supplemental Wages Using the Aggregate Method

    Type:
    How To

    This How To shows employers how to withhold on supplemental wages using the aggregate method.

  • IRS Issues Guidance on Retroactive Increase in Excludable Transit Benefits

    Date:
    January 12, 2016
    Type:
    News

    In Notice 2016-06, the IRS provides correction procedures for fourth quarter Forms 941 and Forms W-2, in light of the retroactive increase in the 2015 monthly transit benefit limit under the PATH Act of 2015.

  • Taxation of Employee Benefits: Employment Law Manual Updated

    Date:
    January 6, 2016
    Type:
    Editor's Choice

    The Taxation of Employee Benefits section of the Employment Law Manual has been updated to include a number of important legislative and regulatory changes that occurred at the end of 2015, such as Affordable Care Act reporting and filing deadline changes.

  • Depositing and Reporting Withheld Taxes: Employment Law Manual Updated

    Date:
    January 6, 2016
    Type:
    Editor's Choice

    The Depositing and Reporting Withheld Taxes section of the Employment Law Manual has been updated to include a number of important legislative and regulatory changes that occurred at the end of 2015, such as Form W-2 filing deadline changes.

  • Taxation of Employee Benefits: Federal

    Type:
    Employment Law Manual

    This section helps HR and payroll professionals to understand how particular types of benefit plans must be structured and how to properly tax and report contributions, reimbursements and distributions in order to ensure compliance with the Internal Revenue Code.

  • Omnibus Tax, Spending Bill Impacts Payroll Administration

    Date:
    December 22, 2015
    Type:
    News

    President Obama has signed an omnibus appropriations bill (H.R. 2029) that will significantly impact payroll operations. The Protecting Americans From Tax Hikes Act of 2015 (PATH Act), which represents half of the bill, permanently extends parity between qualified (tax-free) employer-provided parking and commuter benefits and substantially revises the rules for filing Forms W-2, Wage and Tax Statement, and 1099-MISC, Miscellaneous Income. The Consolidated Appropriations Act of 2016, which is the other half of the omnibus bill, amends the Affordable Care Act.

  • International Payroll Issues: Federal

    Type:
    Employment Law Manual

    This section helps HR and payroll professionals understand the laws and regulations that must be complied with when employees are sent to work abroad or are brought from abroad to work in the US.

  • Taxation of Employee Compensation: Employment Law Manual Updated With Fourth-Quarter Developments

    Date:
    November 13, 2015
    Type:
    Editor's Choice

    The Taxation of Employee Compensation section of the Employment Law Manual has been updated to reflect several fourth-quarter 2015 developments.

  • Taxation of Employee Compensation: Federal

    Type:
    Employment Law Manual

    This section helps HR and payroll professionals comply with the federal income and employment tax laws governing compensation paid, and fringe benefits provided, to employees.