As the April 15th income tax deadline quickly approaches, employees that participated in a cafeteria plan that included employer sponsored health insurance, health care flexible spending accounts (HCFSA), dependent care flexible spending accounts (DCFSA) or health savings accounts (HSA) should keep a few things in mind.
Employer sponsored health insurance
Keep the following forms with your important tax papers as proof of what months you were enrolled in an employer sponsored health insurance plan. When completing your federal tax return, you will be asked if you had coverage during 2018 and the source of the coverage (i.e. employer sponsored, Marketplace, etc.) You are not required to submit these with your tax returns.
1095-B will be sent to you from your health insurance carrier for insured plans and your employer if you have certain self-funded health insurance as proof you had health insurance coverage.
1095-C will be sent to you from your employer as proof of employer-sponsored health plan coverage.
If the employer issued over 250 W-2’s for 2018 they are required to report the value of the health plan in Box 14 of the W-2 for informational purposes only coded as “DD”.
Health Care Flexible Spending Accounts (HCFSA)
Generally employees do nothing special on their personal taxes if they participated in the standard or the limited HCFSA. Essentially any dollars the employee contributes to the HCFSA pre-tax will not appear on the W-2 and will not be reflected in the income amounts. No extra forms to file.
Employer contributions (flex credits) to the HCFSA will get reported in Box 14 of the W-2 for informational purposes only coded as “DD” if the employer issued over 250 W-2’s for 2018. No extra forms to file.
Dependent Care Flexible Spending Accounts (DCFSA)
Any amounts contributed to a DCFSA will be reported in Box 10 of the W-2. Any amounts contributed to the DCFSA pre-tax will not be reflected in the income amounts.
Employees should use Form 2441 to report their Dependent Care provider, participation in a DCFSA and/or take any eligible child and dependent care tax credits. See Form 2441 Instructions.
Health Savings Accounts (HSA)
Employer contributions (including amounts the employee elected to contribute using a Section 125 (cafeteria) plan) to your health savings account will be reported in Box 12 Coded as a “W”. Any amounts contributed to the HSA pre-tax will not be reflected in the income amounts.
Employees will report the information on Form 8889 and/or take any additional tax deductions for deposits made directly to the HSA custodian. See Form 8889 Instructions.
1099-SA is issued by the HSA custodian and represents a report of distributions made from a HSA. The distribution may have been paid directly to a medical service provider or as a repayment to the HSA accountholder. Keep this form with your tax papers. In the event of an audit, it will be up to the taxpayer to provide substantiation to prove tax-free distribution status. The taxpayer should also report any non qualified distributions on their tax return and pay any applicable penalties.
Always consult with a tax advisor for questions regarding preparation of your tax returns and required forms and schedules.