TAP 04-021

Tax Treatment of Health Benefits Education

Statement of Issue:

Many small businesses are making decisions about whether to offer health benefits to their workers without being fully aware of the tax advantages that can make offering health benefits more affordable.

Proposal:

TAP proposed that the IRS partner with educational and professional organizations to provide clear, accurate, and balanced explanations of the tax treatment of health benefits to provide technical advice and encouragement to small businesses considering providing health benefits to employees, and specifically recommended that the IRS:

1. Combine in a new publication explanations about all the tax provisions governing payments for medical expenses to provide information comparable to that provided in various IRS publications about retirement plans for small business.
2. Add to the small business web site information about providing health benefits comparable to the information provided about retirement plans.
3. Expand the explanation of the tax treatment of health benefits and provide a cross-reference to the new publication explaining health benefits in existing publications directed at employers and small businesses.

After receipt of the response from the Office of Taxpayer burden Reduction (OTBR), the TAP Joint Committee agrees that, because recommendations 1) and 3) primarily contemplate forms and publications revisions, they should be directed to Forms and Publications. However, recommendation 2) refers to materials that are produced by or under the direction of SB/SE Taxpayer Education and Communication (TEC), and TAP asked that OTBR consider these recommendations.

Helene Bayder advised that the recommendation about the T Tax Treatment of Health Benefits Education be directed to Forms and Publications (W & I). TAP 04-021 was split into two sets of recommendations. See TAP 04-021B.

After receipt of the response from the Office of Taxpayer burden Reduction (OTBR), the TAP Joint Committee agrees that, because recommendations 1) and 3) primarily contemplate forms and publications revisions, they should be directed to Forms and Publications. However, recommendation 2) refers to materials that are produced by or under the direction of SB/SE Taxpayer Education and Communication (TEC), and TAP asked that OTBR consider these recommendations.