Discussion:1099-MISC Health Insurance to Employees?

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Discussion Forum Index --> Advanced Tax Questions --> 1099-MISC Health Insurance to Employees?
Discussion Forum Index --> Tax Questions --> 1099-MISC Health Insurance to Employees?

Bean (talk|edits) said:

11 January 2008

I have read the 1099-MISC instructions, but still not clear on how to handle this situation. I have a company who has paid employees for their own health insurance plan (i.e. reimbursed employees as they obtain their own plan independently since company does not provide) under nonaccountable plan. This "fringe benefit" payment was never reported in employees' W-2s, which had already been issued (done by ADP), so now I'm trying to see if we need to include that as "compensation" somehow - wouldn't a 1099-MISC Box 7 (or Box 3 Other Income) be appropriate in this case, although the payees are employees? They will be stuck with SE taxes I know. What to do??

I should have mentioned that yes as you've quoted below, but wasn't sure how to handle this. Here's the situation: W I remember in the exact same situation before years ago when I was employed and health insurance was reimbursed to me and my former employer would issue me 1099 instead of having it included in my W-2 as fringe benefit - I filed SE taxes on it anyway. I'm also not sure if it should be in box 3 (other income) or box 7.

Bean (talk\|edits) said:	11 January 2008
Please disregard my second paragraph - should have been deleted.

PostingFromWork (talk|edits) said:

11 January 2008

You need to issue w-2c's and correct the payroll returns.

You can either include the entire amount as wages, and leave it to the employees to deduct medical expenses as they can,

Or you can demand an accounting (a bit late, but you could plead reasonable ignorance) of the insurance expenses. The excess would either need to be returned to the employer or it would need to be included in wages. The actual payments would be excluded from income.

Bean (talk\|edits) said:	11 January 2008
I don't do payroll for this client. ADP has already issued W-2s and employer is hesitant to change the W-2s at this point, so I'm just trying to remedy the situation when asked. I was hesitant about issuing 1099 since they are employees, would you be against that route?