Reporting of Employer Provided Healthcare on Form W-2 – Code DD

Starting with the 2011 W-2 you will be receiving/issuing in January 2012 you may see in Box 12 a new code DD. This is to report to the employee the cost of employer provided healthcare.

This reporting requirement was introduced by the 2010 Affordable Care Act. The idea is that reporting the cost of healthcare will enable employees to be better informed about their healthcare costs and the choices available to them.

There is some transitional relief for employers. For 2011 the reporting is optional. For 2012 the reporting is required for employers filing more than 250 W-2s. The 250 limit may be reduced in the future but for the moment small employers are not required to report the cost of healthcare coverage.

Impact on Employees
For the employee they will see in box 12 of their W-2 an amount and a Code DD. This will be the total cost of employer provided healthcare coverage, employer and employee contributions.

The key point to note is that this entry on the W-2 is not taxable income. It is not included in box 1 of the W-2 and does not need to be entered any where on your tax return. It is just information to let you know the total cost of the healthcare provided by your employer.

Impact on Employers
The IRS has useful information on the Affordable Care Act and the related regulations at their ACA Center.

In summary some of the key points to consider are:-

  • Watch the transitional relief rules, particularly for small employers.
  • Check the rules for what type of coverage is included in box 12 and which coverage is not or is optional.
  • Evaluate how you will collect the information for Box 12 and get it in to Box 12. Is your payroll or other software set up to collect this information.
  • Choose the correct valuation method for your circumstances

This is one of many provisions from the Affordable Care Act that are coming in over the next few years so keep an eye out for more reporting and changes in the future.

If you are ready to prepare your income tax return call me on (480) 363-4808 to book an appointment. If you live in Chandler, Tempe, Mesa, Gilbert, Phoenix, Scottsdale or Queen Creek AZ I will come to you to prepare your income tax return. If you live elsewhere I can prepare the tax return using information you upload to my secure client portal or mail to me. I look forward to helping you prepare your income tax return.

Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.

Posted By Mark Smith

Mark Smith, RTRP is a Registered Tax Return Preparer and accountant with over 30 years tax and accounting experience. He is the owner of Cranmere Accounting and Tax Services LLC. He can be contacted on (480) 363-4808 or by email at info@cranmereaccountingandtax.com if you need assistance with any of the above.

6 Responses to Reporting of Employer Provided Healthcare on Form W-2 – Code DD

  1. Thank You for this note on DD. It was help to understand the new info I received in my 2012 W2.

  2. Thanks so much I was filling on-line and Taxslayer somehow grouped DD in as taxable income which reported my income a lot higher there for I would owe a LOT of money. After reading this I corrected the mistake and all is well I will be getting my usual small refund and I don’t owe anything.

  3. Thank you for this information; I’m glad to find some details about code DD, because as I filled out my tax return, I was shocked to see a tax bill of 1000s of dollars rather than the refund I normally get. But, I want to make absolutely certain that I understand – you’re saying that the amount reported under code DD in boxes 12a-d on my W2 does not have to be entered on my tax return – is this correct? For reference, I’m submitting my tax return through Turbotax. Thanks in advance for your response!

    • And to clarify regarding the tax bill of 1000s – initially, I did enter my amount reported under code DD into my tax return; hence the bill. I have not yet submitted the tax return, however, and can amend it if I need to make the correction.

    • Yes, Code DD does not appear anywhere on the tax return. It is just for information.

  4. Thank you for this information. It has every answer I was looking for.