Wipfli Alerts & Updates: Wisconsin changes adult child health care insurance benefit


November 10, 2011
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On November 4, 2011, Governor Walker signed S.B. 203 into law (2011 Wisconsin Act 49), adopting the federal law provisions relating to the treatment of health insurance benefits provided to an adult child who has not attained the age of 27 as of the end of the tax year.

These provisions are effective for taxable years beginning on or after January 1, 2011, thereby ending the federal/Wisconsin W-2 reporting difference that had been in effect since the federal law was adopted on March 30, 2010.
 
Effect on Employees
 
For taxable years beginning on or after January 1, 2011, the fair market value of the adult child's health insurance coverage is no longer considered taxable income to the employee.

  • The 2011 Form W-2 that the employee will receive in January 2012 should not include any amount of imputed income for the fair market value of accident or health insurance coverage provided to an adult child who has not attained the age of 27 at the end of the year.
  •  Wisconsin tax might have been withheld on the imputed income during the year. Any amount withheld will be included in Box 17 of the 2011 Form W-2 as state income tax.

Effect on Employers

  •  Employers should immediately discontinue imputing income for the fair market value of accident or health insurance coverage provided to the adult child of an employee. Such amounts should no longer be included as taxable income, nor should any amount be withheld based on imputed income.
  •  The 2011 Form W-2 that will be given to the employee in January 2012 should not include any amount of imputed income related to accident or health insurance coverage provided to an adult child who has not attained the age of 27 at the end of 2011.
  •  The total amount of Wisconsin income tax withheld shown on the 2011 Form W-2 will be the total amount withheld on wages plus the amount withheld on any imputed income during 2011.

Please contact Greg Butler, Linda Feirn, or your Wipfli relationship executive with questions or to discuss further.

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