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Double D's New Meaning

The income tax laws they are a-changing, and nowhere is this change more pronounced than the information now available on your W-2 Wage and Tax Statement

Double D's New Meaning, or, Get Your Mind Out of the Gutter, It's Not What You Think

When I was a young lad, and somebody said "Double D" ... I couldn't anticipate DD's new meaning. Today, the only place most people who aren't artificially enhanced or children doing poorly in two (2) school subjects will find DD's is on the 2012 W-2 they received from their employer.

Take a look at box 12 of  your 2012 W-2. If you work for an employer, large or small who offers a package of employee benefits, you've become accustomed to seeing the letter C, which refers to the taxable amount of group-term life insurance over $50,000. This is included in the amounts in boxes 1, 3 (up to the Social Security wage limit) and 5.

Another popular letter code is D, which refers to income deferrals you elected to make into a 401(k)  plan. This code can also include deferrals to SIMPLE retirement accounts that are a part of a 401 (k).

Those who work for a local, state or federal agency will usually see either the letter E or G. These letters refer to elective deferrals under a section 403(b) or 457(b) deferred compensation plan, respectively.

Back To The DD's

This year, the cost to your employer to provide you with employer-sponsored health insurance (nontaxable, at least so far), is represented by the box 12 amount next to the DD's. According to Notice 2011-28 in IRS Section 6051 employers are now required to show on each employee's annual Form W-2 the value of the employee's health insurance coverage sponsored by the employer.

Why Is This So Important?

Remember the 2010 Health Care Reform which finally became law on June 28, 2012? Well, the individual mandate requires all non-exempt U. S. citizens to maintain minimum health insurance coverage, beginning January 2014.  Failure to do so will result in their paying a penalty.

So Guess Where You'll Pay The Penalty?

As a income tax professional, I will, beginning with the preparation of 2014 income tax returns, be required to confirm whether or not a client owns "minimum essential health insurance coverage. Doing returns for employees of firms with more than 50 employees will be easy - the information will be right there on the W-2.

I work with many sole proprietors and single-and-two person LLCs who will be required to show certain proof, such as a letter from the insurance company, cancelled checks, etc. In either case, proper proof must be submitted, or the penalty will be applied to your total tax liability on Form 1040.

Any preparer like myself, who fails to properly document the existence of this minimum essential coverage, will probably find themselves paying hefty fines for failure to conform to preparation rules. Here's a hint: Additional rules will create additional forms to know and complete. Budget for certain increases in your income tax preparation fees. Just a word to the wise.

What If An Employer With More Than 50 Employees Doesn't Offer Health Insurance?

Well, according to IRS Section 4980H, if they don't offer their employees affordable health insurance, they will be subject to a penalty of up to $2000 for each employee.

Ouch.

So What's So Good About The DD's Now?

One of my clients came in for their tax preparation appointment just moaning and groaning about his job.  So I opened our appointment by asking him, "So what do you think of those DD's?"

He smiled a truly conspiratorial smile. "You talking about the Sports Illustrated Swimsuit Edition?"

Then I told him what the DD's new meaning. He looked at me and said, "I will never complain about my job again."

Amazing how little it takes for folks to appreciate all their job has to offer.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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