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IRS Now Requiring Disclosure Of Health Insurance Costs

Disclosure Of Health Insurance CostsBy January of next year; the IRS will require from employers the inclusion of health insurance expenses in the declaration of the year’s income, expenditures and tax deductibles.  This requirement will give employees a clearer view as to how much money was spent for their health care benefits.

According to the IRS, the purpose of this declaration is merely for disclosure and these benefits will remain tax-free.  Some skeptics, however, see this additional requirement to be a way for the IRS and the government to have  more detailed knowledge as to how much money goes to health care every year.  This will also give the IRS an idea as to how much money they are losing in taxes due to income deductions for health care both from the side of the employee and the employer.  Some fear that after the government collects the information, they will gradually remove some of the tax-free features enjoyed by employees and employers.

Some employers believe this disclosure is not necessary.  They already provide employees a detailed list of the amount they have paid on behalf of the employees for their health care plan contributions for medical expense reimbursements.  But, starting next year, the law requires the information be available for IRS assessment at the same time.

There are many disadvantages to this IRS requirement, according to experts, as it is imminent that the IRS will review some of the expenses to make sure that they conform to the health reform law.  Also, if the true intention of the IRS is to merely provide the employees detailed accounting of the benefits given to them, it can also be done by requiring the employers to give a summary of the expenses paid for employee health care.

Although this policy is creating issues for both sides, it will nonetheless take effect by January 2013.

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