On March 17, 2021, the Treasury Department and Internal Revenue Service (IRS) announced that the federal income tax filing due date for individuals for the 2020 tax year is automatically extended from April 15, 2021, to May 17, 2021. On March 29, 2021, the IRS issued Notice 2021-21 and officially extended the federal tax filing and payment deadline to May 17, 2021.

As the May 17^th income tax deadline quickly approaches, employees should keep a few things in mind if they participate in a cafeteria plan that includes employer-sponsored health insurance, a Health Care Flexible Spending Account (FSA), a Dependent Care FSA, or a health savings account (HSA). Here are some tax filing tips related to these employer-sponsored benefits.

Employer Sponsored Health Insurance

When completing a federal tax return, individuals may be asked if they had health insurance coverage during 2020 and the source of the coverage (i.e. employer sponsored, Marketplace, etc.). Individuals may or may not receive a form to show evidence of health coverage (1095-B or 1095-C). Individuals are not required to submit these forms with their tax returns; however, it is best practice to keep a copy with important tax papers as proof of which months an individual was enrolled in an employer-sponsored health insurance plan.

• 1095-B may be sent to individuals as proof of health insurance coverage. This is sent from the health insurance carrier for insured plans and from your employer if individuals have certain self-funded health insurance.
  • Reminder: Beginning in 2020 (for 2019 tax filings and for years following) and primarily as a result of the individual mandate penalty being reduced to $0, issuers of 1095-B can opt to provide prominent notice on their website that 1095-B is available only upon request.
• 1095-C is sent to employees from their employer as proof of employer-sponsored health plan coverage.

If the employer issued over 250 W-2s for 2020, they are required to report the value of the health plan in Box 14 of the W-2 for informational purposes only with the code “DD.”

Health Care FSA

Generally, employees do not need to do anything special on their personal taxes if they participated in the standard health or limited health FSA. Essentially, any pre-tax dollars contributed to the Health Care FSA do not appear on the W-2 and are not reflected in the income amounts. There are no extra forms to file.

Employer contributions (flex credits) to the Health Care FSA are reported in Box 14 of the W-2 for informational purposes only coded as “DD” if the employer issued over 250 W-2s for 2020. There are no extra forms to file for the employee.

Dependent Care FSA

Any amounts participants and/or employers contributed to a Dependent Care FSA are reported in Box 10 of the W-2. Any amounts contributed to the Dependent Care FSA pre-tax are not reflected in the income amounts.

Employees should use Form 2441 to report the Dependent Care provider, participation in a Dependent Care FSA, and/or take any eligible child and dependent care tax credits. See Form 2441 Instructions.

Health Savings Account (HSA)

Employer contributions (including amounts employees elected to contribute using a Section 125 (cafeteria plan) to their health savings account is reported in Box 12 Coded as a “W.” Any amounts contributed to the HSA pre-tax are not reflected in an employee’s income amounts.

Individuals report the information on Form 8889 and/or take any additional tax deductions for post-tax deposits made directly to the HSA custodian. See Form 8889 Instructions. Depending on the circumstances, individuals may need to also report information on Schedule 1 and/or Schedule 2. (See more information in this Buzz Article.)

As a result of the delay in federal income tax filing to May 17, 2021, the IRS also automatically extended the deadline to contribute to a HSA for 2020 to May 17, 2021. Typically, individuals who want to take advantage of this additional time are making contributions outside of their payroll and directly to the HSA custodian. Individuals can take the income tax deduction on Form 8889 when they file their taxes.

1099-SA is issued by the HSA custodian and represents a report of distributions made from an 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 is up to the taxpayer to provide substantiation to prove tax-free distribution status. An individual 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 tax returns and required forms and schedules.