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New Health Insurance Reporting Required on W-2

Under the Affordable Care Act (ObamaCare), payroll depts. should note that employers are now required to report the cost of health insurance coverage under an employer-sponsored group health plan on Form W-2. Originally legislated to kick in in 2011, the IRS granted transitional relief to all employers for 2011. For the year 2012, only employers with 250 or more employees will be required to report this benefit on employee W-2′s. The IRS noted that reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. The IRS also noted that this reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage. Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.

What is the purpose of this new reporting requirement? Under ObamaCare, there is a legislated penalty for those employers and taxpayers who are not covered by health insurance. The reporting requirement will eventually assist the IRS in verifying that taxpayers have coverage.  Additionally, the new reporting requirements will help identify those taxpayers who will be subjected to the so-called Cadillac tax on high-dollar insurance plans (effective in 2018)

The IRS has also recently defined other transitional relief details.  For certain employers, types of coverage, and situations, there is transition relief from the requirement to report the value of coverage on the 2012 Forms W-2 (the forms for calendar year 2012 that employers generally are required to provide employees in January 2013). This relief will apply to future calendar years until the IRS publishes additional guidance. However, any guidance that expands the reporting requirements will apply only to calendar years that start at least six months after the guidance is issued.

The value of the health care coverage will be reported in Box 12 of the form W-2 with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee.

An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.

It is to be noted that the IRS has stated that they are not discouraging early compliance and judging by the fairly limited transitional relief being granted, it is expected that many businesses will comply earlier than required as payroll systems are modified to account for the requirement. Note that Time & Pay is already set to comply! 

For further information on this topic, you can visit the IRS site here. 

 

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1-27-2015

W-2′s and the ACA

The Affordable Care Act (ObamaCare) is raising all kinds of questions for payroll departments as well as tax professionals. Regulations continue to be defined and revised as the program develops. And the IRS recently announced that since they have cut … Continue reading

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1-13-2015

New Home-Care FLSA Compliance Rule Struck Down by Court

A new Dept of Labor regulation that was to go into effect January,  2015 that would have extended the FLSA minimum wage and OT requirements to certain home-care workers was struck down in late Dec. by a Federal District Court … Continue reading

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1-5-2015

IRS Publishes 2015 Circular E

The IRS has published the new 2015 Circular E, also known as the Employers Tax Guide. The 69 page general manual includes rules and regulations for payroll tax compliance and filing as well as new withholding tables for 2015 including … Continue reading

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