As part of the trend of increasing disclosure and transparency, The Patient Protection and Affordable Care Act of 2010 (PPACA) included a new reporting requirement for employers. This new law required employers to include the cost of health care coverage under an employer-sponsored health insurance plan on the 2011 Form W-2 provided to employees.
Originally, the requirement to report health care coverage costs on Form W-2 was effective for 2011 and applied to all employers. The Internal Revenue Service (IRS) issued guidance in October of 2010 delaying this requirement, stating that the reporting requirement would be optional for Forms W-2 for the 2011 tax year (to be issued in January of 2012) and reporting would become mandatory for 2012 Forms W-2 and for all future years.
On March 29, 2011, the IRS again postponed the mandatory reporting requirement. For the tax year 2012, reporting is optional for small employers and mandatory for larger employers. This new guidance makes reporting optional for the 2012 tax year relative to employer-sponsored health coverage cost on the Forms W-2, for employers who file fewer than 250 Forms W-2 in 2011. Employers filing more than 250 Forms W-2 for the 2011 tax year are required to report the cost of health care coverage provided starting in 2012 (to be furnished in January of 2013).
Employers can assure their employees that the employer-sponsored health care coverage remains nontaxable and the reporting requirements are for informational purposes only. Employers can take advantage of this delayed reporting to ensure that the necessary processes and procedures are in place to gather the required information prior to the mandatory compliance deadline.
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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.