The IRS will require that employer’s report the cost of company paid health insurance on employee W-2’s for informational purposes only – the costs of the health insurance is non-taxable.
Many companies who use QuickBooks usually pay the health insurance premium bill on a monthly basis in one lump sum, which is made up of a specific amount for each employee based on the type of plan or coverage that each employee has. Often times the health insurance payment is treated just like any other bill that the company receives and when handled in this manner, the amounts paid for each employee will not flow through to the W-2 automatically and these amounts will have to be entered manually when W-2?s are prepared.
Thankfully, the QuickBooks payroll module is very flexible and can be set up to automatically track the company paid portion of employee’s health insurance each time you run payroll. I’ve been teaching open shop or non-union contractors, who work on prevailing wage projects, who take a credit for company sponsored health insurance against the full fringe benefit rate this method for years.
When these amounts are run through payroll they will automatically flow through onto any W-2?s that you process at the end of the year.
This mp4 video (even though a little outdated at this point) will show you how to track the costs of 100% company paid health insurance so that it will display on employee pay stubs and the W-2 at the end of the year. During the setup of the item that you will use for health insurance tracking, make sure that when you get to the Tax Tracking Type screen that you choose Health Coverage Cost from the drop down menu – this information is NOT shown in the video below as it was not available at the time the recording was made.
This video also demonstrates the use of our Excel-based Health Insurance Calculator, which you can request from a companion article called Calculating Company Paid Health Insurance & The Affordable Care Act.