Walmart employees who don’t have a company-run health plan can still sign up for the employer-sponsored plan.
But if they do, they’ll be able to get their taxes deducted, thanks to a federal law signed last year.
The law allows employers to deduct up to 10 percent of the employee’s salary or wages for health care.
Employees can deduct up the amount that’s owed, up to $10,000, depending on the plan they sign up with.
“If you don’t qualify for the health plan, you can still get your taxes deducted from your paycheck,” said Chris Laughlin, director of policy at the National Employment Law Project, a labor advocacy group.
The 1099 exemption applies to people who are self-employed or self-perpetuating, which means they make payroll while working for the company, not for their own business.
“We have a lot of folks who make over $50,000 who are able to deduct all of their wages on their 1099s, and we’ve seen that anecdotally for years,” Laughlin said.
“So it’s really not a new thing.
There’s a lot that has changed since 2010, and it’s one of the things that really caught our attention.”
Since 2010, the IRS has been cracking down on employers who are failing to file their 1097 forms for self-employment and for employees who aren’t on a company health plan.
Those who aren’s filing the form will face penalties, and employers that don’t comply with the law could face fines and legal penalties.
Under the IRS rules, employers with more than 50 employees can deduct the full amount that their employees are owed, including the employee contribution to the employee health plan if they’re not paid.
“They can deduct it for the entire amount owed, not just the employee contributions,” Lampshear said.
The IRS said in a statement that it will issue guidance to clarify the 1099 rules, “to clarify that individuals can deduct their employee contributions if they meet certain conditions.”
That guidance will be issued in late January, and Lampsher said it’s likely the IRS will issue it later this year.
“It’s really important that the IRS make this clear to employers, as a rule, that employees who are working for their employer but aren’t self-sufficient can deduct all their employee health contributions,” he said.
Companies are already paying their employees for health benefits, which is often paid for through the 401(k), 403(b), or the company-sponsored health plan they choose.
But many employers still aren’t keeping track of how much their employees contribute to their health plans, which makes it difficult to know how much they’re paying for their employees’ health care benefits.
“The IRS has told us that they’ve received numerous inquiries from employers who want to know the amount of the deductible for employee contributions to their 401(p),” Lampshed said.
Lampshes added that while the IRS guidance should help clarify the deduction rules for employers, he said it should not mean that people are making the correct deduction decisions.
“There’s no requirement for them to follow that guidance.
If they follow the guidance, that should mean that they’re going to pay for the coverage that they have,” Lamphes said.
For example, if someone earns $100,000 and the employer pays for all of the premiums for the employee, the employee is able to claim $20,000 for the 401k.
Lampedhes added it’s important to remember that the deduction rule only applies to contributions made to a 401(b) plan.
Employees don’t get a deduction for employee health care, but their contributions to a company’s 401(a) plan will qualify.
“This is really a tax issue, and you can’t deduct your 401(x) contributions, you have to make them deductible,” Lamshear added.
Employers aren’t required to provide employees with a form called a 1099-MISC to report their deductions, but the IRS does recommend that employees provide their employer with their 1098 form to report all of those deductions, and employees should also report their income on the 1098 to show how much income they are allowed to deduct.
Lamshed said he has not seen a situation where a person is unable to deduct his own health care contributions.
“I have never seen one where someone was unable to report that their contributions were deductible, and then when they got to a tax return, it was showing that they weren’t,” Langshear explained.
“In my experience, if they can’t file their taxes, they don’t pay taxes.”
But Lampshee said it may be easier to understand if you have a higher education.
“You don’t need to be a graduate of a graduate school to file your taxes, you just need to have a high school degree,” he added