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Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Wednesday, July 14, 2010

Don’t Believe Everything You Read

Most everyone knows that you can’t believe everything you read on the Internet, yet time and time again, we receive e-mails from friends and family that have not been checked out for accuracy. The most recent and very alarming message, if true, stated that starting in 2011, employees’ W-2s will include the total cost of employer-sponsored health insurance as includable income.

The e-mail states:

“Starting in 2011 - next year - the W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are provided. It doesn't matter if you're retired. Your gross income WILL go up by the amount of insurance your employer paid for. So you'll be required to pay taxes on a larger sum of money that you actually received. Take the tax form you just finished for 2009 and see what $15,000.00 or $20,000.00 additional gross income does to your tax debt. That's what you'll pay next year. For many it puts you into a much higher bracket.”

The above statement is false. While it is true that W-2s will have to include the cost of employer-provided health care, that cost will not be income that you have to report on your tax return. There is a provision in the new health care bill that addresses what are called “Cadillac” health care plans provided by employers. That section of the bill requires that the cost of employer-provided group health insurance be included on employee W-2s. We repeat, however, that the amount is not includable as income.

The amount that the cost of employer-provided health insurance exceeds certain thresholds will be taxed an additional 40% starting in 2018. The threshold for families is reported to be $27,500. The added tax is to be paid by the providing insurance company but will surely be passed on to employers and potentially to employees. The average cost today for a family plan is reported to be $13,400. It is estimated the cost for more than 80% of families will still be below the threshold in 2016. Eventually, as health costs rise, the threshold will likely be exceeded for a significant number of families.

It has also been reported, that at least part of the reason for including the amount on employee’s tax forms is, that in 2014, it will be the IRS’ job to verify that individuals and families have health insurance.

If you receive a questionable e-mail, we urge you to research the facts yourself (In this case, the healthcare bill text is easily accessed via the internet. Using the search function, we were able to easily find the text in question). You can also go to or to check out the validity of a claim. Please note that we do not guarantee the accuracy of the snopes or urballegends’ websites.


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