Error in W-2 on employer provided health care cost

[MamaC1]

My daughter's employer are currently inaccurately stating they had employer provided healthcare costs in Box 12, code DD.   The 1095-C has already been corrected to reflect that she did not have employer provided health care. (There was an issue in 2021 whereas they accidently enrolled my daughter in health insurance for 3 months.  As soon as we identified the error, we asked for a retroactive reversing of the enrollment.  That was accomplished in 2021.) 

The original 1095-C showed the enrollment, but was subsequently amended to reflect a lack of insurance with her employer.    However, as I was doing her taxes, I noticed they didn't correct her W-2.   Her employer is not certain they can get the W-2 corrected.  Will there be an issue with her return if the W-2 shows employer healthcare costs, while we are showing her covered under our plan on our return?  

Facts: She is a dependent on our tax return.  She was on our family plan for all of 2021.  

Thank you!

[JillS56]

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:

1. 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.
2. Fill out your W-2 as best you can using the information from your last pay stub.
3. Answer any questions until you get to the Let's check for uncommon situations screen.
4. Check the box next to Didn't get a W-2 and select Continue.
5. On the Let's check if you need a substitute W-2 screen, select Yes then Continue.
6. 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.

[MamaC1]

Thank you for the message.  The 3 months of healthcare coverage they had signed her up for was at zero cost to her.  I believe the amount was the employer cost of the insurance premiums they would have paid on her behalf.  

Boxes 1, 3 and 5 are all the same dollar amount.  

Based on the above, and if box 12a, Code DD, is informational only, would we be ok to file her return electronically, even if they are not able to get us a corrected W-2?

Thank you!