Solved: Setting up health insurance to show up on W2 in box 14

Your employer may also use Box 12 to report certain retirement plan contributions and nontaxable moving expenses, under the required codes. A Section 125 plan lets employees set aside insurance premiums and other funds on a pretax basis. This can save workers 20% to 40% in taxes per year but these plans offer employers some tax-saving benefits as well. It can be worth it to suggest that your employer set up such a plan or keep it in mind if you’re job hunting so you can potentially hire on with a company that does offer a cafeteria plan. Your employer may report your cafeteria plan deductions in Box 14, which is labeled “Other.” It might use the code “Section 125” or “Café 125,” and then state your pretax payments.

  1. These benefits can be deducted from an employee’s paycheck before taxes are paid.
  2. They are called cafeteria plans because employees are given a list of benefits to choose from, similar to a cafeteria-style menu.
  3. Numerous employers across the U.S. set up and use various types of employee benefits plans allowed by the Internal Revenue Service (IRS).
  4. Since the taxable wages boxes of your W-2 don’t include your Section 125 contributions, to get your real gross wages you should add the amount in ​box 14​ to the amount in the respective taxable wages box.
  5. Learn how to protect yourself and your money from falling victim to tax fraud.

You’ll additionally be able to find many detailed resources about using QuickBooks in our help article archives. I’m happy to hear BettyJaneB was able to help with your inquiry about box 14 and how QuickBooks works with W-2 forms. All features, services, support, prices, offers, terms and conditions are subject to change without notice. Certain §125 benefits require reporting while others not.

With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media. A participant can typically expect to save 20% to 40% of every dollar put into the plan. The amount that the employee decides to put into the plan must be chosen each year. The “election” amount is deducted from the employee’s paycheck automatically for each payroll period.

What Items Are Deducted From Gross Income on a W-2?

Answer simple questions and TurboTax Free Edition takes care of the rest. As far as §125 is concerned, NY regulations 20 CRR-NY 112.2 only require adjustment for plans “established by the City and certain other employers”. Otherwise, NY conforms to IRC for the tax treatment of §125. This is also consistent with the instructions for IT-225. These benefits can help offset the initial plan setup fee and even help the company to save substantially in the long term. Division EE of the Consolidated Appropriations Act of 2021 offers more discretion for FSA and dependent care assistance programs.

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They are informational only and don’t affect the federal return at all. If the S125 is an employee benefit that has also already been removed from Wages in box 1, then again, just choose a category of Other. Indicates employee’s eligibility for pension plan membership. The IRS defines an employee as belonging to a pension plan if that employee is eligible to join a pension plan regardless of whether the plan is joined. These are the contributions to Dependent Care Assistance Program (DeCAP) made through payroll deductions.

The benefits are available to employees, their spouses, and their dependents when a plan is created. Depending on the circumstances and details of the plan, Section 125 benefits may also extend to former employees but the plan cannot exist primarily for them. If you choose “other” – it does not effect the tax return.However, in this case, no entry is correct. This is the total of your non taxable benefits which have already been adjusted to your wages if required. The Washington DC (District of Columbia) regulations require all employers to report wages that were earned by the employee who both worked and lived in Washington DC, in Box 16.

Benefits to Employers and Employees

When creating a section 125 plan, employers will need to consider two important rules. First, the Health or Limited Purpose FSA Uniform Coverage Rule requires that the plan’s maximum reimbursement amount is available at all times throughout the year. This means that if employees opt to contribute $100 per month, they are entitled to receive the entire $1,200 benefit as of the first day of the plan year. Second, the use-it-or-lose-it-rule stipulates that participants in the plan who do not spend their entire balance by the end of the year will forfeit the remaining amount. However, the IRS does give employers the option of offering a 2.5 month grace period, or allowing participants to carry over up to $610 in 2023 to the next plan year.

IMP – Imputed Income, which is the taxable value of the employer contribution for health benefits provided to a retiree’s domestic partner. This amount sec125 box 14 is included in Box 1 and must be reported for federal, state and local taxes. The City paid your social security (Box 4) and Medicare (Box 6) taxes.

Your employer deducts your payments from your wages before withholding certain taxes. Your employer doesn’t include your pretax payments in your taxable wages on your annual W-2. It may, however, choose to report certain benefits on your W-2 and code them as Café 125. In some cases, cafeteria plan reporting on your W-2 is mandatory. Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you can not deduct them as medical expenses.

These are the payroll deductions covered under the Internal Revenue Code Section 125 for flexible spending account programs. Get unlimited live help from tax experts plus a final review with TurboTax Live Assisted Basic. Since there’s no standard list of W-2 codes for box 14, employers can list any description they choose. If the code is unclear, contact your employer and ask what the internal revenue code represents. Section 125 plans do state that you must use any remaining funds in the account by the end of the year or the money is forfeited to your employer.

Additionally, plan contributions are typically not subject to Social Security tax or Medicare (the combined FICA tax) for the employee participant. A Section 125 ‘cafeteria’ plan is so-called because you get to choose your benefits from a menu, like choosing food at a cafeteria. However, while the plan may offer many benefits, ​box 14​ of your W-2 shows only the benefits that apply to you. Your taxable wages (Box 1) and your state and City wages (Boxes 16 and 18) are reduced because of your TDA contributions. You file your federal, state, and city tax returns on the lower reported wage amount. The employee advantages of enrolling in cafeteria plans are simple.

The W-2 form includes the taxable value of your domestic partner’s health plan coverage provided by the City and/or union welfare fund. These are the payroll deductions covered under the Internal Revenue Code Section 414 for pension contributions. As part of the Patient Protection and Affordable Care Act of 2010, employers are required to report this cost to each employee. It is for informational purposes only and is not taxable.

If you are a pension member, your taxable wages in Box 1 are reduced by the amount of your pension contributions. Your contributions shown in Box 14 are not subject to federal income tax, but are subject to FICA (social security and Medicare), state, and local taxes. If you have a Section 125 dependent care plan, your employer must report any amounts it and you paid toward your account in Box 10. As of 2013, dependent care benefits of up to $5,000 are nontaxable; if you’re married filing a separate tax return, your limit is $2,500. Amounts over the limits are taxable and must go in your taxable wages in Boxes 1, 3 and 4. Under a cafeteria, or Section 125, plan, you pay for your employer-sponsored benefits with pretax money.