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Changes to Look for on Your 2011 W-2

Tax time is in full swing and if you are employed, you should have received your W-2 (officially known as the Wage and Tax Statement) by the end of January. No doubt you are familiar with the W-2 form if you have been employed for several years. The size, shape and format of your W-2 depends on the employer’s payroll processing program, but regardless of format, each W-2 contains the same information.

W-2 Form

This year you may find something different on your form. The new health care legislation, the Affordable Care Act, requires employers to report the cost of your employee coverage under your employer-sponsored group health care plan on the W-2 they issue to you. Though optional for 2011 W-2s, these reporting requirements will become mandatory for employers with 250 employees or more in 2012 and become mandatory for all employers beginning with 2013 W-2s.

You’ll find such benefits reported in Box 12 of the Form W-2, identified by the Code DD. If you see health care insurance costs reported on your W-2 this year, don’t panic. Just because the information appears on your W-2 doesn’t mean it is taxable to you. These benefits have always been tax-free, and still remain tax-free under the health care legislation. The information is there so you can better understand the cost of the health insurance benefit you receive through your employment.

The health care coverage costs reported to you will not include the cost of long-term care coverage, accident or disability income insurance, liability insurance, worker’s compensation benefits, or other plans for which medical care benefits are incidental to other benefits. If your dental and vision coverage is under a stand-alone plan not connected to the major medical plan, those costs are also excluded from reporting.

Here are some more tips for reviewing your W-2:

Knowing how to read a Form W-2 can help you understand your salary, and also help you get a head-start when preparing your taxes.

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