Reporting Requirements for Health Care on Form W-2
By Lisa Mark - Paychex, Inc
On March 29, 2011, the Internal Revenue Service issued guidance regarding provisions within the Patient Protection and Affordable Care Act of 2010 requiring employers to report the aggregate cost of employer-sponsored health coverage on Form W-2. This provision is now optional for any employer required to file less than 250 Form W-2s for year-end 2011.
Starting in tax year 2011, the Affordable Care Act originally required employers to report the cost of coverage under an employer-sponsored group health plan. To give employers more time to update their payroll systems, the IRS issued Notice 2010-69, making this requirement optional for all employers in 2011. The IRS then provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional until at least 2012. The IRS guidance also includes information on how to report, what coverage to include and how to determine the cost of the coverage.
The guidance applies beginning with 2012 Forms W-2 (the forms required for the calendar year 2012 that employers generally are required to furnish to employees in January 2013.) Employers are not required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2013.
Employers for whom the additional transition relief applies, including smaller employers that are required to file fewer than 250 2011 Forms W-2, will not be required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2014. The transition relief will continue until the issuance of further guidance.
The 2011 Form W-2 (in draft) is available for viewing on IRS.gov. This is the W-2 that most employees will receive in early 2012. The form includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.
The optional health care reporting is for informational purposes only, in order to inform employees of the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income, and it is not taxable.
The Patient Protection and Affordable Care Act revisions will alleviate a huge recordkeeping burden to smaller business owners. Additional information on these changes can be found at IRS.gov and Notice 2011-28 and Notice 2010-69. Employers that choose to report earlier (on the 2011 Forms W-2 generally furnished to employees in January 2012) may also look to these notices for guidance regarding voluntary earlier reporting.
Lisa Mark, a Sr. Sales Consultant with Paychex, Inc., can be contacted at firstname.lastname@example.org