Wellocity - Federal Tax Reporting Requirements for Wellness Incentives

© 2015 Wellocity Inc.Contact: [email protected]

Federal Tax Reporting Requirements for Wellness Incentives

Wellocity do not provide tax, legal or accounting advice, this document is for information only.

Purpose of Wellness Incentives

• Develop healthy habits and healthy lifestyles.

• Prevent and manage disease.

• Maximize employee economic benefits.

• Reduce cost to employer.

• Create a stronger company by keeping employees happy and healthy in the workplace.

© 2015 Wellocity Inc.

Wellness Incentives in Wellocity

Reward IncentivesTango Gift Card:

•Versatile, flexible, no expiration dates, and no purchase fees.

Merchandise, certificates, medals, etc.:

•Personalized and delivered by the Employer.

Challenge Winners:

•Encourage personal goals and healthy competitions.

Team Buzz:

•Send motivational messages to strategize on challenges or cheer team on!

Recognition Incentives


Taxation of Wellness Incentives

The IRS states that ALL wellness incentives are taxed and subject to payroll taxes UNLESS it qualifies as an employer -provided health benefit or “De Minimis” fringe benefit.

Employer-Provided Health Benefits• Medical care is NOT taxable: diagnosis, cure, treatment, or prevention

of disease.• Contributions to FSAs, HRAs, and HSAs on a tax -free basis.

“De Minimis” Fringe Benefit (Very Minimal Benefits)• Services of little value is NOT taxable: occasional movie, sports event

ticket, coffee, healthy snacks, health seminars, small raffle items, small prizes, etc.

© 2015 CloudMetRx. All rights reserved. Source: Federal Tax Implications of Wellness

Incentives and Rewards


Taxation of Wellness Incentives

*Cash and Gift Cards*• Cash and cash equivalents (like gift cards) are ALWAYS

taxable no matter how small UNLESS they qualify as medical care.

Fitness Memberships• Public gym membership ARE taxable UNLESS prescribed by a

doctor.• Membership of on-site athletic facilities owned/leased by the

employer and used by employees, spouses, and dependent children are NOT taxable.


Incentives and Rewards© 2015 Wellocity Inc.

Reporting Taxable Wellness Incentives

Under the ACA, employers are required to report:

• All taxable wellness incentives on each employee’s W 2 Form and withhold payroll taxes.

• The cost of employer- sponsored health coverage on each employee’s W 2 Form.

Benefit may be taxable even if the benefit is received by a spouse and/or child.

• If incentives are provided to the employee tax-free, it can also be tax-free for covered spouse and dependents.

Federal and state income taxes are treated the same.


Incentives and Rewards© 2015 Wellocity Inc.

Tax Consequences

Employer is directly liable for employee’s taxes. Penalty for non-compliant include:

• Federal income taxes: 25%/35%• FICA taxes: SS taxes of 6.2% on first $113,700 and Medicare taxes

of 1.45%• Employer share of FICA taxes• IRS late deposit penalty• IRS fine of $100 per incorrect W-2• 20% negligence penalty• Interest

Best Practice: If a benefit is taxable, report taxable amount on W-2 Form and

withhold employment taxes.

© 2015 CloudMetRx. All rights reserved. Source: Taxation of Workplace Wellness Programs


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Wellocity - Federal Tax Reporting Requirements for Wellness Incentives

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