The reporting of the cost of health insurance on a W-2 is for informational purposes only and will provide employees with useful and comparable consumer information on the cost of their health care coverage.
A concern would be whether or not she is reporting the correct gross wages. Many times the amount of health insurance reported under Box 12 Code DD is treated as pre-tax dollars and reduces the gross wage in Box 1 of the W-2. Is your daughter's income in Box 1 less than the amount in Box 3 or Box 5? If so, is the difference between Box 1 and Boxes 3 and 5 the amount of the health insurance shown in Box 12 Code DD. If so, this would be a problem. She is getting a pre-tax dollar credit for the health insurance and she did not pay for the insurance. There is no reason why the employer cannot issue a corrected W-2 removing the health insurance from Box 12 Code DD and correctly the Box 1 amount of other W-2.
There may be a problem with your daughter's return would not be because you are claiming her as a dependent or that she is covered under your insurance plan but rather whether the amount of her income in Box 1 is correct.
On the other hand, the IRS would not know that the W-2 is incorrect unless the employer would file a corrected W-2. If the employer is refusing to correct the W-2, then you would have no choice but to file with the W-2 she has or enter her income under the Substitute W-2 process. The only problem with a Substitute W-2, you cannot e-file. To file using a Substitute W-2 would be to file a conventional paper return that includes IRS Form 4852 if all efforts to obtain a W-2 from your employer have failed. Here's how to fill one out:
- Open your return and search for W-2. Select the Jump to link in the search results to get to the W-2 entry screen.
- Fill out your W-2 as best you can using the information from your last pay stub.
- Answer any questions until you get to the Let's check for uncommon situations screen.
- Check the box next to Didn't get a W-2 and select Continue.
- On the Let's check if you need a substitute W-2 screen, select Yes then Continue.
- Answer the follow-up questions. Select Print to download and print your IRS Form 4852.
Returns including Form 4852 can't be e-filed per IRS regulations.
The main drawback to this method would be that since the return will be mailed, it may take longer to process.
