The Patient Protection and Affordable Care Act, signed into law in March of 2010, includes a provision that requires the amount of employer-provided healthcare benefits, though nontaxable, be reported on an employee’s Form W-2 beginning in 2011.
The Internal Revenue Service (IRS) issued a draft Form W-2 for 2011 on October 12, 2010. The draft form stipulates that the cost of employer-sponsored health coverage (if provided by the employer) should be reported in Box 12, using Code DD. The amount reported with Code DD is not taxable.
Simultaneous to the release of the draft Form W-2, the IRS also issued Notice 2010-69, which provides interim relief to employers with respect to reporting the cost of coverage provided under an employer-sponsored group health plan.
Specifically, the Notice provides that the reporting requirement contained in the Patient Protection and Affordable Care Act is not mandatory for Forms W-2 issued in 2011. For 2011, employers are not required to (and will not be subject to penalties for failure to) report the cost of employer-provided health care on employees’ Forms W-2.
The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year. Schneider Downs will continue to monitor this situation and provide updates on future guidance issued by the IRS.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.